Samsung Elec Q2 profits are likely to fall 39% due to weak AI chip sales

By Heykyong Yang

SEOUL (Reuters) – Samsung Electronics is expected to forecast a 39% drop in operating profit for the second quarter on Tuesday, falling due to delays supplying advanced memory chips to artificial intelligence chip reader Nvidia.

According to LSEG SmarteStime, the world’s largest manufacturer of memory chips is projected to report 6.3 trillion won ($4.62 billion) from April to June, with its lowest revenue in six quarters and a fourth consecutive quarter decline.

Long-term weakness in financial performance has deepened investors’ concerns about the South Korean tech giant’s ability to keep up with smaller rivals in the development of high-bandwidth memory (HBM) chips used in artificial intelligence data centers.

Its major rivals, SK Hynix and Micron, benefit from the robust demand for the memory chips needed for AI, but Samsung’s profits are curtailed as it relies on the Chinese market, where sales of advanced chips are relied on by the US-limited.

Efforts to obtain the latest version of the HBM chip to NVIDIA certified by NVIDIA are also moving slowly, analysts said.

“We are pleased to announce that we are committed to providing a range of services to our customers,” said Ryu Young-Ho, senior analyst at NH Investment & Securities.

He said it is unlikely that Samsung’s new chip cargo to Nvidia will be important this year.

Samsung had anticipated that meaningful advances over HBM chips could come as early as June in March, but declined to comment on whether the HBM 3E 12-layer chip has passed the NVIDIA qualification process.

However, the company has begun supplying chips to AMD, the US company said in June.

Samsung’s smartphone sales are likely to help support inventory demand ahead of potential US tariffs on imported smartphones, analysts said.

Many of the major businesses, including chips, smartphones and consumer electronics, continue to face business uncertainty from a variety of US trade policies, including President Donald Trump’s proposal on a 25% tariff on non-US made smartphones and deadlines for “mutual” tariffs on many trading partners.

The US is also considering revoking approvals granted to global chip makers, including Samsung, making it more difficult to receive US technology on Chinese plants.

Samsung’s stock, the worst stock of any major memory chip maker, rose about 19% this year, below the benchmark Cospi’s 27.3% increase.