Samsung Electronics Co. Ltd. (OTC:SSNLF) has projected a gradual second-half recovery for its semiconductor business after second-quarter operating profit at the division plunged 93.84% from a year earlier, driven by U.S. export restrictions on advanced chip sales to China and inventory adjustments.
Chip Division Posts Weakest Performance in Six Quarters
The South Korean tech giant’s Device Solutions division posted an operating profit of 400 billion won ($287 million) during the April-June period, down from 6.5 trillion won ($4.67 billion) a year earlier. This marked the first time in six quarters that chip division profits dropped below the 1 trillion won mark.
Samsung reported a total operating profit of 4.7 trillion won ($3.37 billion) for the second quarter of 2025, its weakest performance in six quarters. Revenue rose 0.7% year-over-year to 74.6 trillion won ($53.5 billion), according to the company’s Thursday earnings report.
AI Demand Expected to Drive Recovery
Samsung expects the industry environment to improve in the second half, driven by demand for artificial intelligence from continued investments by major cloud service providers. The company cited “proactive addressing of server demand by expanding HBM3E sales” and growth in high-density DDR5 products.
However, Samsung warned of concerns about slowing global growth due to an uncertain trade environment and geopolitical risks, particularly following U.S. President Donald Trump‘s announcement of 15% tariffs on South Korean goods.
Tesla Partnership Bolsters Foundry Business
The earnings announcement came days after Tesla Inc. (NASDAQ:TSLA) confirmed a $16.5 billion deal to source chips from Samsung through 2033. The partnership involves manufacturing Tesla’s next-generation AI6 chips at Samsung’s Texas facility, potentially strengthening the company’s struggling foundry business.
Samsung’s foundry division remained weak despite significant revenue growth, with earnings impacted by inventory value adjustments stemming from U.S. export restrictions and prolonged low utilization at mature nodes.
Memory Business Shows Mixed Results
The Memory division saw sales increase 11% quarter-over-quarter to 21.2 trillion won ($15.2 billion), though down 3% year-over-year. Samsung expanded HBM3E sales to address server demand while significantly reducing NAND inventory through the expansion of server SSD sales.
For the second half, Samsung plans to increase high-density, high-performance SSD production while accelerating the transition to 8th Generation V-NAND across all applications. The company aims to expand sales of industry-leading 128GB DDR5 and 24Gb GDDR7 for AI servers.
Price Action: Samsung traded at 71,400 KRW ($51.41) on Thursday on the South Korean exchange, down 1,200 KRW ($0.86) or 1.65% as of 12:23 p.m. local time. The stock is up 18,000 KRW ($12.97) or 33.71% year to date.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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