Samsung Electronics said Tuesday it expects its second-quarter operating profit to drop by more than half, blaming U.S. export controls on superior AI chips.
The company is the flagship subsidiary of South Korean giant Samsung Group, the largest home control group to date and dominates Asia’s fourth largest economy.
The tech giant said in a regulatory filing that it expects its operating profit from April to June to fall to 4.6 trillion won ($3.3 billion), down to 56% from the same period last year and 31% from the previous quarter.
The figure is 23.4% lower than the average estimate, according to data from Yonhap News Agency, South Korea, which quotes its own financial data company.
Estimated sales are 74 trillion won, down 0.1% from the same period last year and 6.5% from the previous quarter.
The company did not disclose its net income or detailed revenue from its business unit.
The company explained in another version why the result “has no market expectations.”
The company’s main semiconductor division “reduced profit by a quarter of a quarter due to inventory value adjustments and U.S. restrictions on China’s advanced AI chips.”
Washington has expanded its efforts to prevent Beijing from gaining state-of-the-art chips as they fear they can be used to drive the country’s military system and other technological capabilities.
These restrictions mean that the company’s high-tech plants operate well below capacity.
However, Samsung predicts that in the second half of the year, it will “gradually utilize as demand gradually recovers to improve operational losses.”
Samsung’s shares fell about 0.8% on Tuesday.
“Weak Casting”
Trendforce analyst Tom HSU told AFP that the huge profits and revenue declines were attributed to “the main foundry business, while the performance of the memory business remained relatively stable.”
The outlook for the next quarter is more optimistic, “as strong demand, especially data center memory chip prices and goods to maintain a rising rise”, which includes AI, including AI.
South Korean investment and securities analyst Chae Min-Sook said the performance of the company’s HBM chip (for advanced AI computers) may not be expected.
Additionally, its NAND price declines – for data storage – “may be slightly amplified”.
She added: “Sharp decline in the WOR dollar exchange rate since June may lose sales and operating profits (Q2).
Samsung is one of the smartphone makers under pressure from U.S. President Donald Trump, who threatened South Korea’s 25% tariffs in a letter unanimous to Seoul.
Trump has repeatedly asked global companies, including Samsung and rival Apple, to allocate production to the United States, and many experts warn that this is unrealistic, invoking supply chains based on Asia.
South Korea has been levied on steel and car exports and said it was maintaining “close contact” with the Trump administration on Tuesday as it attempts to take other measures.
