Seoul: Samsung Electronics Co’s chip business has reported a roughly 40% drop in profit after US export controls dented sales of its high-end chips even as it seeks to catch up in the lucrative artificial intelligence (AI) memory arena.
March-quarter operating profit at Samsung’s chip segment tumbled to 1.1 trillion won or about US$766.2mil on erosion in average selling prices, as well as a drop in sales of its key high-bandwidth memory chips due to export controls, according to a company statement.
Some clients also deferred orders in anticipation of upcoming enhanced HBM3E products, it said.
Those outweighed a boost from Chinese customers stockpiling chip supplies ahead of US tariffs.
“Samsung is planning to ramp up the enhanced 12-layer HBM3E product in the second quarter to meet demand from some clients,” said Greg Noh, an analyst with Hyundai Motor Securities Co. “But unless there is demand from Nvidia, it’s difficult to expect dramatic improvement in the chip business.”
Its shares were down about 0.3% yesterday morning in Seoul.
South Korea’s largest company faces mounting challenges in its high-bandwith memory (HBM) business.
The company has struggled for months to secure Nvidia Corp’s final nod for its most advanced HBM products, which are today the most lucrative segment for memory makers.
Icheon-based SK Hynix Inc retains the top position in providing these chips enabling AI accelerators.
That catch-up effort continues to eat away at Samsung’s earnings.
It spent nine trillion won in research and development in its first quarter, up 16% from a year ago.
The grim numbers came even as Samsung benefited from a rebound in demand for PC memory and smartphones, two of its key sales drivers.
Customers from Apple Inc to Lenovo Group Ltd hastened shipments to the United States over the first quarter of the year to pre-empt tariffs by the US administration.
Its own Galaxy S25 flagship smartphone series also buoyed earnings.
That helped boost net income to 8.03 trillion won, above estimates.
But such one-time pre-tariff gains do little to assuage concern about long-term demand.
Global trade tensions “make it difficult to predict future performance,” the company said in a statement.
If uncertainties fade, Samsung expects performance to improve in the second half of the year, it said.
Analysts including Canalys see the first-quarter surge in shipments as an acceleration of deliveries from later in the year, and any intensification in US-China tensions could put more pressure on global trade. — Bloomberg
