Seoul: Samsung Electronics Co. on Tuesday reported an estimated 55.9 percent decline in its second-quarter operating profit compared to the previous year, primarily due to a downturn in its chip business and the impact of U.S. trade policies, falling short of market expectations. The world's leading memory chip manufacturer projected an operating profit of 4.59 trillion won (US$3.4 billion) for the quarter ending in June, a sharp decrease from 10.44 trillion won a year earlier, as per an earnings guidance released by Samsung Electronics.
According to Yonhap News Agency, the operating profit also saw a 31.2 percent drop from the previous quarter's 6.69 trillion won. The figure was 23.4 percent lower than the average estimate, based on a survey conducted by Yonhap Infomax, the financial data firm of Yonhap News Agency. Revenue slightly decreased by 0.1 percent to 74 trillion won, though data on net earnings was unavailable.
In a separate statement, Samsung Electronics cited the significant quarterly decline in profit as a result of inventory replenishments and the effects of the U.S. ban on the export of advanced AI chips to China. Looking forward, Samsung expects a recovery in demand and sales of premium high bandwidth memory (HBM) chips, despite reports suggesting that its HBM products did not pass quality tests by U.S. AI chip leader Nvidia Corp.
"The memory business saw a decline in performance due to one-off costs, such as provisions for inventory asset valuation," the company noted. "However, improved HBM products are currently being evaluated and shipped to customers." Samsung also mentioned that its non-memory division, including the foundry segment, is likely to reduce losses in the third quarter, supported by better utilization rates amid a gradual demand recovery.
Although Samsung did not provide detailed earnings by business division, market analysts estimated that its semiconductor unit recorded an operating profit of approximately 1 trillion won in the first quarter. Experts attributed the disappointing second-quarter performance to sluggish HBM product sales, a decrease in NAND flash prices, and a stronger Korean won.
The introduction of the flagship Galaxy S series smartphone in January, which resulted in a 10 percent year-on-year sales increase in the first quarter, had minimal impact on the company's second-quarter outcomes. Additionally, Samsung's conventional television and home appliance divisions are anticipated to have experienced a decline in profitability during this period due to U.S. tariff effects.
Despite the weak results, analysts predict a rebound in the third quarter, driven by a recovery in memory chip prices. "Samsung Electronics' operating profit appears to have bottomed out in the second quarter and is expected to show gradual improvement," stated Roh Geun-chang, chief researcher at Hyundai Motor Securities Co., highlighting potential gains in HBM sales. Samsung Electronics is set to release its final earnings report later in the month.