Samsung flags sharp Q2 profit drop, blames US curbs on AI chip sales to China

Samsung Electronics has warned of a much steeper-than-expected fall in its second-quarter profit, blaming United States export restrictions on advanced AI chips for China and slow shipments to key customers.

Profit set to plunge 56%, missing forecasts

The South Korean technology giant on Tuesday forecast a 56 per cent drop in operating profit for April–June from a year earlier, far below analyst expectations. According to Reuters, Samsung estimated its operating profit at 4.6 trillion won ($3.32 billion) for the second quarter, well under the 6.2 trillion won average forecast from analysts in LSEG’s SmartEstimate.

That would mark its weakest quarterly profit in six quarters, down from 10.4 trillion won a year earlier and 6.7 trillion won in the previous quarter. Revenue is expected to edge down 0.1 per cent year-on-year to 74 trillion won, the company’s filing showed.

US export controls hit AI chip sales

Samsung cited Washington’s curbs on selling advanced artificial intelligence chips to China as a key reason for the disappointing performance. “The DS Division recorded a quarter-on-quarter decline in profit due to inventory value adjustments and the impact of US restrictions on advanced AI chips for China,” Samsung said in a statement on Tuesday.

According to Reuters, US authorities last year ordered Taiwan Semiconductor Manufacturing Co to halt shipments of advanced chips used in AI applications to Chinese customers. Samsung now faces similar headwinds, with its own sales of high-bandwidth memory (HBM) products also affected.

Delays in Nvidia chip supply add to woes

Analysts noted that Samsung’s earnings slump also stemmed from production delays in supplying advanced chips to major customer Nvidia, the US-based AI chip leader. Samsung said its upgraded HBM products were “undergoing customer evaluation and proceeding with shipments” but did not provide further detail, as per Reuters.

Greg Roh, head of research at Hyundai Motor Securities, told Reuters that the sharp miss would weigh on investor confidence. “The worse-than-expected profit will be negative for investor sentiment,” he said.

Foundry business also under pressure

Samsung also warned of continued weakness in its semiconductor foundry business. The company said earnings fell due to the same export restrictions and related inventory value adjustments, alongside persistently low utilisation rates.

However, Samsung expressed some cautious optimism for the second half of the year, forecasting that its foundry losses would narrow as demand recovers and utilisation improves.

Hopes for recovery in the second half

Despite the grim second-quarter outlook, Samsung said it expects its broader earnings to recover gradually in the third quarter. The company is counting on rising sales of HBM chips to non-Nvidia customers and the boost from upcoming smartphone launches.

Detailed results, including a business-by-business earnings breakdown, are expected to be released in late July. As Samsung grapples with geopolitical tensions and supply-chain challenges, the earnings warning highlights the growing impact of US–China trade restrictions on global technology supply chains and underscores the risks facing the world’s largest memory chipmaker.