Samsung is facing a significant drop in its profits for the second quarter of 2025, with projections indicating a decline of 56%, far worse than experts initially predicted.
What’s behind this surprising downturn? The main factor appears to be weak sales of Samsung’s high-performance memory chips, which are crucial for artificial intelligence (AI) devices and services.
As the world’s largest manufacturer of memory chips – the essential silicon components that store data in everything from smartphones to computers and AI servers – Samsung’s recent challenges are striking. The company acknowledged that US restrictions limiting the sale of advanced AI chips to China are damaging its business. However, experts also suggest that Samsung has fallen behind in delivering its next-generation memory chips, called HBM (high-bandwidth memory), to its key client, Nvidia, a major player in AI hardware.
Earlier this year, in March, Samsung was optimistic about its new HBM3E 12-layer chips, which it hoped to start shipping by June. But now, the company reveals that these chips are still undergoing customer testing, with no clear timeline for when Nvidia will begin using them.
While Samsung is facing setbacks, competitors like SK Hynix and Micron are capitalizing on the AI surge in the US, while Samsung’s reliance on the Chinese market – affected by American restrictions and local competition – is slowing its sales there. An analyst quoted by Reuters stated that Samsung’s future hinges on catching up in the AI chip race. Without this, the company risks falling further behind.
The situation could worsen if new US tariffs on electronics, including smartphones, are imposed, which could also impact Samsung’s phone business. Furthermore, with fierce competition in the market, raising prices to boost profits is not an easy solution.
For the April-June period, Samsung’s projected profit is around 4.6 trillion Korean won (approximately $3.36 billion), a stark drop from 10.4 trillion won in the same period last year, marking its worst earnings in a year and a half. Total sales are expected to remain relatively flat at 74 trillion won ($54 billion).
Looking ahead, Samsung is hopeful that new smartphone launches, including the foldables set for July 9, will help improve the situation. Additionally, it expects demand for AI chips from customers outside Nvidia to gradually rise. Samsung’s chip manufacturing (foundry) business is also facing challenges, particularly due to US restrictions on sales to China and lower production levels. However, the company is optimistic that this sector will lose less money in the second half of the year as demand begins to recover.
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