Samsung Electronics forecast a steep 56% drop in its second-quarter operating profit, far below expectations, primarily due to weak AI chip sales. This has raised fresh concerns about the company’s struggling semiconductor division. Samsung attributed the downturn to U.S. export restrictions on advanced AI chips to China. However, analysts also pointed to delays in delivering high-bandwidth memory (HBM) chips to major U.S. client Nvidia as a contributing factor. Despite earlier indications of progress on its new 12-layer HBM 3E chips, Samsung offered no updates on Nvidia-related shipments, stating only that customer evaluations were ongoing.

While competitors like SK Hynix and Micron have seen strong AI-driven chip demand in the U.S., Samsung remains heavily reliant on China—a market hampered by U.S. restrictions and intensifying local competition. Analyst Ryu Young-ho of NH Investment & Securities emphasized that Samsung’s key challenge is regaining its competitive edge in HBM chips, which are central to the future of its chip business.

Additional pressure comes from potential U.S. tariffs and pricing challenges, which could weigh on margins. Samsung’s projected April–June operating profit is 4.6 trillion won, well below the 6.2 trillion won SmartEstimate and down from 10.4 trillion won a year ago. Revenue is expected to dip slightly to 74 trillion won.

The company noted that chip profits were also affected by inventory valuation losses, with analysts suggesting unsold HBM stockpiles for Nvidia played a role. They estimate the chip division’s profit may plunge over 90% to just 500 billion won, though the mobile division may show gains. Samsung’s stock fell 0.2%, trailing a broader market gain. It also announced a 3.9 trillion won share buyback, part of a larger 10 trillion won repurchase plan.

Analysts are cautiously optimistic, expecting gradual profit recovery from new phone launches and HBM sales to non-Nvidia clients. Foundry earnings also declined due to export controls and low capacity use but are expected to improve in the second half as demand picks up. Samsung will provide a detailed earnings report on July 31.