Seoul: Samsung Electronics Co. announced Thursday that its net income plummeted nearly 50 percent in the second quarter, primarily due to its struggling semiconductor division, which recorded its lowest earnings in over a year owing to diminished demand for high bandwidth memory (HBM). In a regulatory filing, the company reported a net income of 5.11 trillion won (US$3.7 billion) for the April-June period, reflecting a 48 percent drop from 9.84 trillion won a year earlier.
According to Yonhap News Agency, the reported earnings fell short of market expectations, with analysts estimating an average net profit of 7.29 trillion won, as per a survey by Yonhap Infomax, the financial data arm of Yonhap News Agency. Operating profit was recorded at 4.67 trillion won, marking a 55.2 percent decline from the previous year, while revenue experienced a slight increase of 0.7 percent to reach 74.56 trillion won.
The semiconductor division posted an operating profit of 400 billion won, the lowest since the fourth quarter of 2023, when it faced a 2 trillion-won operating loss. Samsung Electronics attributed the weak bottom line in its chip division to one-off costs, including inventory value adjustments. Despite these challenges, chip sales grew by 11 percent year-on-year to 27.9 trillion won, spurred by demand for premium server chips and increased foundry orders.
The main memory business achieved stable growth, bolstered by sales of HBM3E products and memory for data center servers. However, the System Large Scale Integration (LSI) segment continued to grapple with low profitability, and the foundry business saw its profit deteriorate due to inventory adjustments linked to U.S. sanctions on AI chip exports to China.
The DX division, encompassing mobile, TV, and home appliance sectors, witnessed a 16 percent on-year drop in sales to 43.6 trillion won amid intensifying competition, while posting an operating profit of 3.3 trillion won. The mobile unit reported 29.2 trillion won in sales and 3.1 trillion won in operating profit, supported by steady sales of the Galaxy S25 series smartphones launched in the first quarter.
The TV segment showed improvement in sales of premium products, such as Neo QLED and OLED TVs, but overall earnings declined due to lukewarm demand and increased competition. Looking ahead to the second half, Samsung anticipates a recovery in the global information technology market, driven by AI and robotics, despite ongoing concerns over trade uncertainties and geopolitical risks.
The semiconductor division aims to focus on meeting the rising demand for high-value-added and AI-driven products, such as HBM, while enhancing its competitiveness in advanced semiconductor technologies. Additionally, it plans to boost sales of high-density and high-performance solid-state drives (SSDs) to cater to the growing demand for chips for AI data centers. The mobile division is expected to sustain momentum in the second half by concentrating on its newly released foldable smartphones.
Analysts predict a rebound in Samsung Electronics' earnings in the second half. According to a recent survey by Yonhap Infomax, Samsung is projected to post 81.4 trillion won in sales and 8.3 trillion won in operating profit during the July-December period.
Samsung Electronics also commented on the Korea-U.S. tariff agreement announced earlier, expressing that the deal will help reduce economic uncertainty. "We will monitor further negotiations on the specifics of the agreement and devise responsive measures accordingly," the company stated during its earnings call.
Additionally, Samsung is preparing countermeasures for the potential outcome of the U.S.' ongoing investigation into semiconductor imports, which could lead to additional tariffs. The South Korean government assured that tariffs on South Korean chips and drugs will not be harsher than those for other countries.
Regarding the recent 22.8 trillion-won foundry contract with Tesla Inc., Samsung revealed plans to increase facility investments next year to support the order. Shares of Samsung Electronics declined by 1.65 percent to close at 71,400 won on the main bourse, underperforming the broader KOSPI's 0.28 percent drop. The earnings report was published before the market opened.