Samsung "explodes," expected Q2 net profit to plummet by 56%!

Samsung Electronics' second-quarter profit is expected to plummet by 56%, potentially reaching its lowest level in six quarters.

On Tuesday, Samsung Electronics released its second-quarter performance guidance, expecting second-quarter sales to remain flat at 74 trillion won, with operating profit declining by 56% year-on-year to 4.6 trillion won (approximately 3.3 billion USD).

This profit level will set a new low for six quarters, significantly lower than the LSEG SmartEstimate forecast of a 39% decline to 6.3 trillion won. The chip business has become the main drag, with inventory value adjustments and uncertainties in trade directly undermining profitability.

Meanwhile, Samsung's competitive disadvantage in the AI chip sector is becoming increasingly apparent. The failure to timely obtain certification from key customer NVIDIA for its latest HBM3E chip has caused Samsung to miss out on the AI boom, while competitors SK Hynix and Micron Technology are thriving in this area.

As a result of this news, Samsung's stock price fell by 0.6% on Tuesday, while SK Hynix's stock price rose by 3.3%. So far this year, Samsung's stock price has only increased by 15%, far behind SK Hynix's approximately 65% rise.

HBM Chip Supply Disruptions Become Key Drag Factor

Samsung's difficulties in the high-bandwidth memory (HBM) chip business have become the core reason for the decline in performance.

The company clearly stated that U.S. trade policies have led to disruptions in chip sales, while related inventory value adjustments have further eroded profits. Additionally, the non-memory chip business has also incurred losses due to low utilization rates and trade policies.

Furthermore, although the company recently began supplying HBM3E chips to AMD and Broadcom, it has still failed to obtain performance certification from AI chip giant NVIDIA.

In contrast, smaller competitors SK Hynix and Micron Technology are enjoying strong demand for advanced HBM chips. SK Hynix, as a major HBM supplier for NVIDIA, is expected to announce record quarterly earnings. Micron also released a quarterly revenue forecast that exceeded expectations last month, based on strong demand for HBM chips.

NH Investment & Securities senior analyst Ryu Young-ho pointed out that Samsung's HBM revenue in the second quarter is likely to remain flat, and shipments of new chips to NVIDIA are expected to be limited this year.

Analysts estimate that Samsung's losses in the foundry business exceeded 4 trillion won in the first half of the year, due to failures in attracting major customers and an expanding gap in yield and technology with industry leader TSMC.

Smartphone Business Seeks Breakthrough

Despite the dismal performance in the second quarter, Samsung remains cautiously optimistic about the second half of the year. The company expects that operating losses in the foundry business will narrow as demand gradually recovers The analyst report from DS Investment & Securities indicates that Samsung's profits may rebound after hitting bottom in the third quarter, with the key being the progress of HBM supply to Nvidia and the overall recovery in chip demand.

In the smartphone sector, Samsung hopes that the launch of a thinner foldable smartphone in New York this week will revitalize market performance.

Although global foldable smartphone shipments grew by 12% to 17.2 million units last year, Samsung's market share fell from 54% to 45%, and the uncertainty of trade conditions further casts a shadow over its sales outlook.

Wallstreetcn previously mentioned that according to a report from CCTV News in May, Trump suggested imposing a 25% tariff on smartphones produced overseas, such as those from Apple and Samsung, unless they move production to the United States.

However, some analysts expect that even if the U.S. imposes tariffs on imported smartphones, advance stocking by dealers may support Samsung's short-term sales