By Kwanwoo Jun

Samsung Electronics' first-quarter net profit was stronger than expected, as solid gains in its smartphone segment offset weak earnings at its core semiconductor business, which was hurt by U.S. restrictions on advanced-chip exports to China.

The South Korean technology giant said in an earnings call Wednesday that uncertain global trade conditions under the new U.S. tariff policy make it difficult to predict the impact on its business this year, but its performance is expected to improve in the second half if the uncertainty is alleviated.

The world's largest maker of memory chips and smartphones reported a sequential drop in semiconductor earnings for the third straight quarter, reflecting the fallout of the U.S.-China trade war and its continued struggle to catch up with rivals in supplying advanced high-bandwidth-memory products for artificial-intelligence applications.

New U.S. curbs on exports of advanced chips to China led to a decline in Samsung's HBM shipments, weighing on its chip segment for the first quarter, the company said.

Earnings at its smartphone business remained strong, however, with the segment's operating profit surging from the previous quarter on brisk shipments of new AI-enabled Galaxy S25 models.

First-quarter net profit climbed 22% from a year earlier to 8.223 trillion won, equivalent to $5.74 billion, beating the 5.635 trillion won consensus estimate from a FactSet poll of analysts. Profit was 6.0% higher than the previous quarter.

Revenue increased 10% from a year ago to 79.141 trillion won, a quarterly record, while operating profit rose 1.2% to 6.685 trillion won. Both figures were higher than its preliminary estimates.

Samsung's chip-making division generated operating profit of 1.1 trillion won, down 62% from the prior quarter's 2.9 trillion won, largely due to weaker sales of HBM products. That is much lower than the more than 7 trillion won its smaller chip-making rival SK Hynix made during the period, which was thanks to brisk shipments of higher-end AI chips such as advanced 12-layer HBM3E products.

The tech titan said decreased sales of higher-end HBM products weighed on its semiconductor business, though increased sales of DRAM chips used in data servers and recovering NAND chip prices led to additional demand for memory chips. Analysts said some clients' stockpiling of chips and mobile phones ahead of U.S. tariffs may have helped boost demand.

Samsung expects its sales of HBM products to recover from the second quarter, with its new HBM3E sample products now being tested by its major clients for qualification and more advanced HBM4 products under development, Jaejune Kim, executive vice president and head of the company's memory global sales and marketing office, said during the earnings call.

The company's division that makes smartphones and other consumer electronics demonstrated solid profitability, with operating profit doubling to 4.3 trillion won from the previous quarter. It said its new Galaxy S25 smartphones were a key driver of the robust results.

While smartphone demand is expected to be seasonally weak in the second quarter, Samsung plans to launch new foldable phones in the second half of the year and enhance the function of AI-enabled devices to boost sales.

Shares in the South Korean company were 0.5% lower after the earnings report. The stock is up around 4% this year, underperforming the benchmark Kospi's 6% gain.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

April 30, 2025 00:28 ET (04:28 GMT)

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