Samsung Electronics Co’s chip unit saw profit plunge a far bigger-than-expected 94 percent in the June quarter, reflecting the depth of a slump that’s plaguing the world’s largest memory chipmaker.
The weak results at the pivotal business underline how far Samsung has fallen in the lucrative artificial intelligence (AI) arena, where SK Hynix Inc leads in high-end memory and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) dominates in contract chipmaking.
The chip arm today reported three-month operating profit of 400 billion won (US$288 million), the lowest in six quarters, versus analysts’ average projection for 2.73 trillion won.
Photo: Jung Yeon-je, AFP
The decline stemmed largely from a one-time inventory cost as US export controls led to unsold AI chips at its foundry business, which relies in part on Chinese demand. The profit decline was despite solid demand for high-end memory products for servers, the company said.
Shares of South Korea’s largest company fell as much as 1.8 percent this morning in Seoul.
The grim results reflect Samsung’s poor performance on high-bandwidth memory (HBM), Counterpoint research director MS Hwang said. Samsung’s share in the global HBM market slipped to 17 percent in the second quarter in terms of bit volume, down from more than 40 percent in the first quarter of last year, he said.
“This suggests that Samsung has fallen behind even Micron Technology Inc to rank No. 3,” in the second quarter, he said.
Samsung will “actively respond” to demand for higher-density memory, the company said. Operating losses at Samsung’s foundry unit are expected to narrow in the second half of the year on a gradual recovery in demand, the company said.
Samsung’s underwhelming quarterly report comes after the company early this week won a US$16.5 billion contract from Tesla Inc to produce AI chips at an upcoming plant in Taylor, Texas.
The company has been stepping up spending on research and development and front-end capacity in its efforts to catch up with SK Hynix and Micron in AI memory chips. Samsung has struggled to get its latest products certified by Nvidia Corp — providing an unusually long window for SK Hynix to carve out commanding leads in the booming AI memory market.
At the same time, it has been trying to win large customers away from contract chipmaking powerhouse TSMC to revive its ailing foundry division where operating rates have plunged. TSMC has begun production in Arizona and is ramping up capacity in the US, while Samsung has slowed completion of its Taylor plant, now scheduled to start operating next year.
A successful implementation of the multi-year deal with Tesla would improve Samsung’s prospects for winning more clients and validate its technology for 2-nanometer mass production.
Investors are also looking for clues as to whether Samsung will benefit from Nvidia’s resumption of sales of its H20 AI chips to China. Samsung’s less advanced HBM3 has been used alongside H20 chips in the past.
Samsung said net income came to 4.93 trillion won in the June quarter, missing the analysts’ estimate of 6.37 trillion won.
Fears about missing first-mover advantages in AI have weighed on Samsung. That’s despite solid double-digit profitability in its mobile segment, which reported solid sales of its Galaxy S25 phones. Samsung hopes to maintain momentum through the recently released Galaxy Z Fold and Z Flip as well as the debut of its first trifold smartphone later this year.
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