By Kwanwoo Jun
Samsung Electronics posted lower quarterly net profit, dragged down by its sluggish semiconductor business, but expects earnings to regain momentum in the second half of this year.
The world's largest maker of memory chips and smartphones said Thursday that its semiconductor earnings fell sequentially for a fourth consecutive quarter, hurt by the effect of U.S. curbs on chip exports to China and delayed sales of advanced high-bandwidth-memory products to Nvidia for artificial-intelligence applications.
Second-quarter net profit fell 48% from the year-earlier period, to 5.116 trillion won, equivalent to $3.67 billion, missing the 5.740 trillion won consensus estimate of analysts in a FactSet poll. Compared with the previous quarter, profit fell 38%.
Revenue rose 0.7% from a year earlier, to 74.566 trillion won. Operating profit dropped 55%, to 4.676 trillion won, as the company booked one-off inventory-value losses on unsold advanced chips due to U.S. export controls on China. Both figures were largely in line with the company's preliminary estimates.
Earnings at the chip segment more than halved to 400 billion won from the previous quarter's 1.1 trillion won.
Earnings at its smartphone business also turned soft, with the segment's operating profit falling to 3.1 trillion won from the previous quarter's 4.3 trillion won.
Samsung maintained an optimistic outlook despite the downbeat results. Earnings could improve gradually as the AI boom fuels demand for semiconductors, personal computers and mobile devices in the second half of the year, it said.
Shares in Samsung have risen around 36% so far this year, largely in line with the gain in the benchmark Kospi.
Some analysts bet that Samsung could stage a strong earnings recovery from the third quarter. In a recent note, HSBC analysts Ricky Seo and Hankil Chang said the technology giant will likely gain from a rise in memory-chip prices, seasonally strong demand for organic light-emitting diode panels, and its long-delayed supply of HBM3E products to customers.
Samsung has been lagging behind its smaller chip-making rivals, SK Hynix and Micron Technology, in supplying HBM3E products to Nvidia.
In a major win for its U.S. foundry business, Samsung earlier this week reached a $16.5 billion deal to manufacture AI chips for Tesla.
Tesla Chief Executive Elon Musk confirmed the deal on X, saying that Samsung's new facilities in Texas will be dedicated to making the U.S. electric-vehicle giant's next-generation AI6 chip. The AI6 is intended to be used in humanoid robots, self-driving cars and AI data centers.
With the new chip plant expected to start operations as early as the second half of 2026, Samsung could get an estimated $2.4 billion annual revenue boost from 2027, thanks to the Tesla contract, Citigroup analysts led by Peter Lee wrote in a research note.
The deal could help Samsung narrow the gap with Taiwan Semiconductor Manufacturing in the foundry business--making chips on a contract basis for customers such as Nvidia, Qualcomm and Apple, which design chips but don't have their factories to produce them.
Industry tracker TrendForce, a research firm, estimated that TSMC's share of global foundry revenue increased to 67.6% in the first quarter of 2025 from 67.1% in the previous quarter. Samsung's share fell to 7.7% from 8.1% over the same period.
"Samsung's foundry business is at a critical juncture between survival and profitability," said Neil Shah, vice president of research at Counterpoint Research. "It needs to attract more customers so it can support the significant investments in advanced foundry nodes while competing with TSMC, which has performed better on yields and performance profitability."
Write to Kwanwoo Jun at kwanwoo.jun@wsj.com
(END) Dow Jones Newswires
July 30, 2025 20:20 ET (00:20 GMT)
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