SEOUL, April 6, 2025 – Samsung Electronics, the global leader in memory chip manufacturing, is poised to announce a significant 21% drop in its first-quarter operating profit on Tuesday, April 8, 2025.
The anticipated decline is attributed to sluggish sales of artificial intelligence (AI) chips and persistent losses in its contract chip manufacturing division, underscoring the South Korean tech giant’s challenges in keeping pace with the rapidly evolving semiconductor market.
The company, currently navigating a management transition following the unexpected death of co-CEO Han Jong-Hee in late March, has faced mounting pressure in its semiconductor business.
Analysts estimate Samsung’s Q1 operating profit will fall to approximately 5.2 trillion won ($3.85 billion), down from 6.6 trillion won in the same period last year, according to Reuters’ initial report.
This marks a stark contrast to the optimism surrounding AI-driven chip demand, an area where Samsung has struggled to maintain its competitive edge.
AI Chip Sales Falter as Rivals Surge Ahead
Samsung’s semiconductor division, historically a cornerstone of its profitability, has been grappling with declining earnings since mid-2024.
A key factor is its lag behind rival SK Hynix in supplying high-performance memory chips, such as High Bandwidth Memory (HBM), to AI industry leader Nvidia.
While SK Hynix has solidified its position as Nvidia’s primary HBM supplier—highlighted by its HBM3E chip announcement—Samsung’s efforts to penetrate this lucrative market have faltered, leaving it reliant on lower-margin, less advanced products.
“Samsung’s inability to secure a foothold in the high-end AI chip segment has exposed its vulnerabilities,” said Ryu Young-ho, a senior analyst at NH Investment & Securities.
“Demand from Chinese customers for non-restricted chips dropped in Q1 after a surge late last year, further softening sales.”
This shift comes as U.S. export restrictions, detailed in the U.S. Commerce Department’s October 2024 update, continue to limit access to cutting-edge technology in China, a market that once accounted for a significant portion of Samsung’s chip revenue.
According to LSEG SmartEstimate data, the chip division’s operating profit is projected at 1.7 trillion won for Q1, down from 1.9 trillion won a year ago.
This decline reflects not only weaker AI chip demand but also broader challenges in the global semiconductor landscape, where traditional chip markets for PCs and smartphones remain sluggish.
Foundry Delays Compound Woes
Samsung’s contract chip manufacturing, or foundry, business continues to bleed red ink, exacerbating the company’s financial strain.
Analysts anticipate further delays in the launch of its new U.S.-based factory in Taylor, Texas, now expected to begin operations in 2027 rather than 2026.
Initially slated for a 2024 opening as part of a $17 billion investment announced in Samsung’s 2021 press release, the facility has been hampered by a lack of major production orders, leaving Samsung trailing behind Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading foundry.
“The foundry business remains a drag on Samsung’s bottom line,” noted Kim Soo-jin, a semiconductor analyst at Hana Financial Group. “Without significant client wins, it’s unlikely to turn profitable anytime soon.”
The delay underscores Samsung’s struggle to diversify its revenue streams beyond memory chips, a critical pivot as AI and high-performance computing reshape industry dynamics.
Mobile Division Offers a Silver Lining
Amid the semiconductor slump, Samsung’s mobile and network business is expected to provide some relief. Analysts forecast a Q1 profit of 3.7 trillion won for the division, up from 3.5 trillion won a year earlier.
The uptick is driven by increased smartphone shipments, bolstered by the successful rollout of the Galaxy S25 series, and a favorable exchange rate due to a weakening South Korean won, which boosts repatriated earnings. Samsung highlighted the AI enhancements of the Galaxy S25 in its January 2025 unveiling.
The Galaxy S25 has helped Samsung reclaim its position as the world’s top smartphone vendor, overtaking Apple amid the latter’s sales struggles in China, as reported by Counterpoint Research’s Q1 2025 analysis.
However, the mobile division’s reliance on Qualcomm processors rather than Samsung’s in-house Exynos chips signals ongoing weaknesses in its logic chip design business.
Leadership Transition Adds Uncertainty
The sudden passing of co-CEO Han Jong-Hee has thrust Samsung into a period of uncertainty, with a management reshuffle underway as the company prepares its earnings report.
Han’s death, a significant loss for the firm, comes at a time when Samsung faces intensified competition and shareholder scrutiny over its AI strategy.
The annual general meeting in March highlighted investor frustration, with the company’s stock plunging 32% in 2024, compared to a 10% decline in the broader South Korean market, per Bloomberg’s KOSPI index tracking.
Jun Young-hyun, head of the chip division, is among the executives expected to address these challenges in Tuesday’s earnings call. Investors will be keenly watching for updates on Samsung’s progress in supplying HBM chips to Nvidia and its plans to reverse the foundry’s fortunes.
Looking Ahead
Despite the gloomy Q1 outlook, some analysts remain cautiously optimistic about Samsung’s long-term prospects.
The global chip market is projected to grow to $778 billion by 2028, fueled by AI demand, according to Samsung’s 2024 industry forecast.
Efforts to ramp up production of advanced HBM3E chips and integrate its memory, foundry, and packaging services into a one-stop solution could position the company to reclaim lost ground.
For now, however, Samsung faces an uphill battle to restore its semiconductor dominance. As the tech giant prepares to unveil its preliminary earnings, the spotlight will be on its ability to adapt to an AI-driven future while navigating internal and external pressures.
