**Samsung Electronics Reports First Profit Decline Since 2023 Amid AI Chip Challenges**
Samsung Electronics Co. has experienced its first profit decline since 2023, primarily due to U.S. restrictions on AI chip exports to China and setbacks in its plans to supply advanced memory products to Nvidia Corp. The South Korean tech giant announced a preliminary operating profit of 4.6 trillion won for the June quarter, marking a significant 56% decrease compared to the same period last year. Analysts had anticipated a 41% drop, highlighting the severity of the situation. Revenue for the quarter reached 74 trillion won, with one-time inventory-related costs contributing to the profit decline.
In a statement, Samsung noted that customer evaluations and shipments of its advanced memory products are ongoing. The company expects operating losses in its contract chipmaking division to decrease in the latter half of the year as demand gradually recovers. A comprehensive financial report, including net income and divisional breakdowns, is set to be released later this month.
Samsung has been striving to regain its position in the high-bandwidth memory (HBM) chip market, which is essential for powering Nvidia’s AI accelerators. However, the company has yet to obtain certification from Nvidia for its latest product, the 12-layer HBM3E, resulting in a prolonged lead time for competitor SK Hynix in this lucrative sector. Meanwhile, U.S. rival Micron Technology Inc. has been making rapid advancements to establish its presence in the market.
Prior to the preliminary earnings announcement, analysts surveyed by Bloomberg News had projected that Samsung’s chip division would report an operating profit of 2.7 trillion won in the second quarter, a rise from 1.1 trillion won in the previous quarter but still significantly lower than the 6.5 trillion won reported a year earlier. In April, Samsung had expressed optimism about its outlook, indicating that it had shipped enhanced HBM3E samples to major clients and anticipated that this product line would contribute to revenue in the second quarter. The company also plans to initiate mass production of HBM4 chips in the latter half of the year.
Samsung is in a competitive race with SK Hynix, which has positioned itself as Nvidia’s primary HBM4 supplier. SK Hynix shipped the world’s first 12-layer HBM4 samples ahead of schedule, followed by Micron in June, while Samsung has had to revise its 12-layer HBM3E design. Recently, Samsung secured an order from Advanced Micro Devices Inc., joining Micron as a supplier. However, the delay in obtaining early certification for HBM3E chips from Nvidia, the leading manufacturer of AI-supporting graphics processing units, is hindering Samsung’s efforts to capture significant market share.
Bernstein analysts, led by Mark Li, had previously expected Samsung’s 12-layer HBM3E to be qualified by Nvidia in the second quarter but have since adjusted their forecast for Samsung’s HBM market share, now anticipating certification in the third quarter. They noted, “Samsung will gradually narrow the gap vs rivals,” while projecting that SK Hynix will maintain its leadership position in 2027, although competition is intensifying.
**FAQ**
*What factors contributed to Samsung’s profit decline?*
Samsung’s profit decline was primarily due to U.S. restrictions on AI chip exports to China, challenges in securing certification for its advanced memory products from Nvidia, and one-time inventory-related costs.
