US Export Controls Hit Samsung's Profits Hard, Tech Giant Expects Significant Decline

Samsung Anticipates Over 50% Profit Drop in Q2, Citing US-China AI Chip Restrictions

Samsung Electronics on Tuesday announced an anticipated drop of over 50% in its second-quarter operating profits, primarily attributing this decline to U.S. export restrictions on advanced AI chips to China. The South Korean tech giant projected its April-June operating profits to fall to 4.6 trillion won ($3.3 billion), representing a 56% decrease from the previous year and 31% from the first quarter. This figure also fell short of average market estimates by 23.4%. Sales are estimated at 74 trillion won, showing a slight decrease from the previous year and the prior quarter.

In a separate statement, Samsung explained that its key semiconductors division saw a quarter-on-quarter profit decline due to inventory value adjustments and the impact of U.S. restrictions on advanced AI chips for China. These U.S. efforts aim to prevent Beijing from acquiring state-of-the-art chips, fearing their use in advancing China's military and tech capabilities. Consequently, Samsung's high-tech factories have been operating significantly below capacity due to these restrictions.

Analysts largely attribute the sharp profit and revenue drop to the "weak foundry business," while the memory business remained relatively stable. Despite the current challenges, Samsung projects an improvement in the second half of the year, expecting to trim operating losses as demand gradually recovers and utilization improves. However, the company is also facing pressure from U.S. President Donald Trump, who has threatened South Korea with 25% tariffs and repeatedly demanded that global companies, including Samsung, relocate production to the U.S.