Samsung flags sharp fall in Q2 profits on United States chip woes
Samsung Electronics said Tuesday it anticipated a drop of over 50% in its second-quarter operating profits, citing U.S. export restrictions on advanced AI chips to China as the main reason.
The firm is the flagship subsidiary of South Korean giant Samsung Group, by far the largest of the family-controlled conglomerates that dominate business in Asia's fourth-largest economy.
The tech giant said in a regulatory filing that its April-June operating profits were expected to drop to 4.6 trillion won ($3.3 billion) – down 56% from a year earlier and 31% from the previous quarter.
The figure was 23.4% lower than the average estimate, according to South Korea's Yonhap news agency, which cited its own financial data firm.
Sales were estimated at 74 trillion won, down 0.1% from a year earlier and 6.5% from the previous quarter.
The company did not disclose its net income or the detailed earnings of its business divisions.
In a separate release, the company explained why the results 'fell short of market expectations.'
The company's key semiconductors division 'recorded a quarter-on-quarter decline in profit due to inventory value adjustments and the impact of U.S. restrictions on advanced AI chips for China,' it said.
Washington has expanded efforts to prevent Beijing from getting state-of-the-art chips over concerns that they could be used to advance the country's military systems and other tech capabilities.
The restrictions mean the company's high-tech factories were running well below capacity.
However, Samsung projected that in the second half of the year it would trim operating losses 'as utilization improves due to a gradual recovery in demand.' Shares in Samsung were down around 0.8% in Seoul on Tuesday.
The sharp profit and revenue drop is attributed 'primarily to the weak foundry business, while the performance of the memory business stayed relatively stable,' Tom Hsu, an analyst at TrendForce, told Agence France-Presse (AFP).
The outlook for the next quarter is more optimistic, with 'memory chip prices and shipments to keep rising, thanks to strong demand,' especially from data centers, added Hsu, including for AI.
Performance from the company's HBM chips – used for advanced AI computing – 'likely fell short of expectations,' said Chae Min-sook, an analyst at Korea Investment and Securities.
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