Samsung Profits Take Big Hit from US Chip Controls and AI Memory Shortfalls
TL;DR
- Samsung Electronics projects a 56% drop in second-quarter operating profits.
- The decline is attributed to U.S. export restrictions on AI chips and delays in supplying advanced memory to Nvidia.
- Revenue is expected to fall slightly, highlighting challenges in recovering its semiconductor business.
- Competitors like SK Hynix and Micron are benefiting from a robust demand for memory chips.
Samsung Electronics has issued a stark forecast predicting a significant plunge in its operating profits for the second quarter of 2025. The company anticipates a 56% decrease, driven primarily by U.S. restrictions on advanced AI chip sales to China and challenges in meeting orders for high-bandwidth memory (HBM) from key clients like Nvidia. This downturn underscores the mounting pressures on one of the world’s largest memory chipmakers amidst changing global trade dynamics and intensifying competition.
Financial Projections and Market Reactions
In a regulatory filing, Samsung reported that it expects its operating profit for the April-June period to drop to 4.6 trillion won (approximately $3.3 billion), a sharp decline from the 10.4 trillion won reported for the same period the previous year. The forecast also missed market expectations, which averaged around 6.2 trillion won[^1][^2]. The company’s revenue may fall 0.1% year-on-year, indicating sluggish demand continuing from the previous quarter.
Investors reacted negatively to the news, as Samsung's stock saw a slight decline of 0.2% following the announcement. In contrast, its competitors, such as SK Hynix and Micron Technology, have reported strong sales driven by AI growth, which further emphasizes Samsung's struggles in the competitive landscape.
Contributing Factors
In analyzing the factors contributing to this downturn, Samsung specifically pointed to several elements:
U.S. Export Controls: The company cited export restrictions imposed by the U.S. on advanced AI chips, which has significantly hampered its ability to serve essential clients in China and other markets that require high-performance components[^3].
Delays in Memory Chip Supply: Notably, there have been delays in the supply of advanced HBM chips to Nvidia, a critical partner. Samsung has yet to gain approval for its latest HBM3E chips, which are vital for AI computing applications[^4].
Industry Landscape and Future Outlook
Analysts express concerns about Samsung's ability to regain its footing amid increasing competition. According to insights from TrendForce, Samsung's semiconductor division has faced a quarter-on-quarter decline due to inventory value adjustments and the ongoing fallout from U.S. restrictions. The foundry business has also reported significant losses, estimated at over 4 trillion won in the first half of 2025, attributed to weak demand and operational inefficiencies.
While Samsung is projected to narrow its operating losses in the latter half of the year as demand gradually recovers, analysts warn any recovery hinges on the company’s capacity to enhance memory chip supply to customers like Nvidia and manage pricing pressures that could affect profit margins[^5].
Conclusion
Samsung Electronics is at a critical juncture as it navigates through substantial operational challenges marked by U.S. trade restrictions and an increasingly competitive semiconductor market. Should it fail to adapt swiftly, the tech giant risks further entrenchment in its current struggles. As Samsung gears up for product launches and looks to enhance supply chains amidst this volatile environment, stakeholders remain hopeful for a rebound in the upcoming quarters.
References
[^1]: Samsung flags big miss in second-quarter profit, cites US AI chip curbs on China | Reuters. (2025-07-08). Retrieved October 8, 2025.
[^2]: Samsung profits take big hit from US chip controls and AI memory shortfalls. (2025-07-08). Financial Times. Retrieved October 8, 2025.
[^3]: Samsung expects steep drop in operating profits on US chip woes. (2025-07-08). Economic Times. Retrieved October 8, 2025.
[^4]: Samsung's brutal profit plunge shows how far the company has slipped in the chip war. (2025-07-08). Business Insider. Retrieved October 8, 2025.
[^5]: Samsung’s Profits Plummet Amid US Chip Controls and AI Memory Supply Challenges. (2025-07-08). Sri Lanka Guardian. Retrieved October 8, 2025.
Keywords
Samsung Electronics, AI chips, U.S. export controls, semiconductor market, operating profit, Nvidia, SK Hynix, Micron Technology.