Samsung Warns of 56% Profit Drop as AI Chip Race Leaves Tech Giant Lagging
Samsung Electronics announced on Tuesday that it expects its operating profit for the second quarter to plummet by 56%, highlighting the challenges it faces in keeping up with soaring demand for advanced AI chips dominated by rivals like Nvidia.
The South Korean tech giant — known globally for its smartphones and memory chips — projected an operating profit of around 4.6 trillion Korean won (about $3.36 billion), significantly lower than last year’s 10.44 trillion won for the same period. This result also fell short of analyst expectations, which had forecast approximately 6.26 trillion won in profit. Revenue is estimated at 74 trillion won, slightly missing the anticipated 75.55 trillion won.
Following the announcement, Samsung’s shares dropped by over 1% during early trading. The company attributed the weaker outlook to inventory adjustments, regulatory hurdles on high-performance AI chips bound for China, and delays in certifying its latest high-bandwidth memory (HBM) chips.
Samsung has struggled to match the success of competitors like SK Hynix and Micron in the advanced memory chip market, crucial for powering AI applications. While SK Hynix has secured a strong partnership as Nvidia’s main supplier, Samsung’s attempts to certify its latest HBM products have reportedly been postponed to at least September.
Experts noted that Samsung’s advanced memory chips have yet to meet Nvidia’s qualification standards, significantly limiting short-term growth opportunities — especially since Nvidia alone drives around 70% of global HBM demand.
Although Samsung has won some supply deals with AMD, these contributions are unlikely to boost second-quarter results due to production timelines. Meanwhile, the company’s chip foundry business continues to grapple with weak demand and intense competition from Taiwan Semiconductor Manufacturing Company (TSMC).
Additionally, Samsung had previously directed global subsidiaries to cut staff by up to 30% in certain divisions to streamline operations. Despite recent setbacks, Samsung’s shares remain up over 16% so far this year. Detailed results for the quarter are expected to be released later this month.
