Samsung's Q2 profit falls short as chip slump, tariffs take toll

Korea Herald

08-07-2025

To offset earnings miss, tech giant launches W3.91tr buyback with major share cancellation
Samsung Electronics forecast its earnings to fall significantly short of market expectations in the second quarter this year, dragged down by weak semiconductor sales, unexpected inventory-related costs and growing uncertainties including US tariffs.
In its earnings guidance Tuesday, the tech giant predicted its consolidated sales to post 74 trillion won ($54.1 billion) for the April-June period, down 0.09 percent on-year. The operating profit estimate plunged 55.9 percent to post at around 4.6 trillion won.
The figures came in well below market consensus, which had forecast 76.2 trillion won in sales and 6.2 trillion won in profit, according to estimates compiled by market intelligence firm FnGuide.
While Samsung did not release a detailed breakdown of the earnings by business, it explained that its Device Solution division, which oversees the company's semiconductor business, saw a profit decline from the previous quarter due to inventory-related costs and the impact of US export controls on advanced AI chips to China.
Weak performance in the chip sector was further weighed down by large-scale inventory valuation losses.
Industry sources say Samsung likely cleared out older high-bandwidth memory products — such as those made before the advanced 12-high HBM3E currently undergoing Nvidia's quality testing — or chips that became difficult to sell due to US export restrictions to China.
Anticipating potential losses from the devaluation of the previously manufactured chips, Samsung appears to have preemptively booked these costs in the second quarter.
The chip giant also appears to have posted a loss in its non-memory business. Sales fell short of expectations due to US government export controls and related inventory write-downs occurred, affecting shipments of lucrative HBM chips.
"Improved HBM products are currently being evaluated and shipped to customers," Samsung said in an explanation. "While the non-memory business continued to suffer from low line utilization, we expect losses to narrow in the second half as utilization improves in line with gradual demand recovery."
Securities firms estimate that the DS Division's Q2 operating profit may have fallen below 1 trillion won.
"Samsung's HBM performance in Q2 likely fell short of expectations, while NAND flash prices declined compared to the previous quarter, widening losses," Chae Min-sook, an analyst at Korea Investment & Securities, said.
"The foundry business is also expected to have recorded a loss similar to Q1, and the sharp drop in the won-dollar exchange rate since June will likely have a negative impact on both revenue and operating profit."
US tariff hikes also appear to have contributed to Samsung's poor Q2 results. Shifting US trade policies and weakening global consumer demand appear to have affected the company's consumer electronics and TV businesses.
While market expectations for the tech giant's third-quarter performance remain mixed, eyes are on whether Samsung will secure a rebound with the launch of its new foldable smartphones — the Galaxy Z Fold 7 and Galaxy Z Flip 7 — set for Wednesday.
The new smartphone series features Samsung's in-house Exynos 2500 chip, raising hopes that it could not only boost mobile earnings but also help revive the company's struggling logic chip and foundry businesses.
Meanwhile, Samsung also announced a 3.91 trillion won share buyback program, with 2.81 trillion won worth of shares to be canceled to enhance shareholder value. The remaining 1.1 trillion won will be used for employee bonuses, the company said.
Samsung is scheduled to release its full financial results, which include net earnings and performance breakdowns by business division, on July 31.