This Jan. 31, 2025, file photo shows the entrance of the Samsung Electronics Co. headquarters in southern Seoul. (Image courtesy of Yonhap)
SEOUL, July 8 (Korea Bizwire) — Samsung Electronics reported a 56% drop in second-quarter operating profit, as its core semiconductor business struggled with falling demand, inventory losses, and geopolitical headwinds, reinforcing concerns over the company’s near-term growth trajectory.
The tech giant on Tuesday announced preliminary earnings of 4.6 trillion won ($3.3 billion) on 74 trillion won in revenue — a slight dip in sales year-over-year, but a sharp decline in profit.
Analysts attribute the plunge primarily to a one-off inventory valuation loss of approximately 1 trillion won in its Device Solutions (DS) division, which includes memory and foundry operations and accounts for more than half of Samsung’s total earnings.
Once the company’s primary profit engine, the DS division is now under pressure from a confluence of factors: ongoing weakness in NAND flash markets, mounting losses in foundry operations, and delayed traction in high-bandwidth memory (HBM) supply to major AI chipmakers like Nvidia.
Samsung noted that write-downs were applied to older-generation HBM inventory that is unlikely to be sold at full market value — particularly as the company pivots to its upgraded HBM3E 12-layer product, currently undergoing qualification testing with Nvidia and already in supply deals with AMD.
The company’s foundry business also took a hit from tightened U.S. export controls on advanced AI chips to China, leading Samsung to preemptively write off inventory meant for Chinese clients. Meanwhile, the NAND segment, which contributed over 4 trillion won in profit last year, has slipped into potential loss territory amid waning demand and pricing pressure.
Despite operating foundries and plants abroad, including in the U.S. and Vietnam, Samsung’s reliance on global exports leaves it vulnerable to trade frictions, and its efforts to shift toward premium enterprise SSDs and higher-margin products have yet to offset broader industry softness.
In contrast, rival SK Hynix is expected to outpace Samsung in first-half operating profit for the second straight quarter, riding the wave of dominant market share in HBM — a crucial memory component in AI accelerators — with forecasted earnings nearing 9 trillion won for Q2 alone.
Still, analysts believe the worst may be over. With memory prices rebounding and seasonality returning to mobile and display units, Samsung is forecast to stage a modest recovery in the second half.
The company is accelerating efforts to secure a position in Nvidia’s HBM supply chain, ramping up mass production of HBM4, and betting on advanced 2-nanometer processes in its foundry roadmap.
“S2Q appears to mark the bottom,” said Roh Geun-chang, head of research at Hyundai Motor Securities. “We expect gradual improvement, driven by the increasing share of HBM within DRAM and cost efficiencies in the foundry business.”
Samsung will release its full segment-level earnings report later this month.
Kevin Lee (kevinlee@koreabizwire.com)
