By Heekyong Yang and Joyce Lee
SEOUL (Reuters) -Samsung Electronics (005930.KS) on Tuesday projected a far worse than expected 56% plunge in second-quarter operating profit due to weak AI chip sales, deepening investor concerns over the tech giant’s ability to revive its struggling semiconductor business.
The world’s biggest memory chipmaker blamed the profit miss on U.S. restrictions on advanced AI chips for China, but analysts said the decline was also due to delays in supplying high-bandwidth memory (HBM) chips to key U.S. customer Nvidia.
In March, Samsung (005930.KS) flagged meaningful progress on its latest HBM 3E 12-layer chips could come as early as June. But on Tuesday it gave no update on supply to Nvidia (NVDA), only saying its improved HBM products were undergoing customer evaluation and proceeding with shipments.
Key rivals SK Hynix (000660.KS) and Micron (MU) have benefited from robust demand for memory chips driven by AI growth in the United States, while Samsung relies more on China, where sales of advanced chips are restricted by the U.S. and competition with local rivals is growing.
“For Samsung Electronics, the key issue remains regaining competitiveness … Everything ultimately comes back to HBM,” said Ryu Young-ho, a senior analyst at NH Investment & Securities.
Potential U.S. tariffs also cloud the outlook for Samsung’s mainstay chip and phone businesses, pressuring margins.
“It will also be difficult to raise prices immediately due to competition, making it challenging to sustain high margins,” Ryu said.
Samsung estimated an operating profit of 4.6 trillion won for the April-June period, versus a 6.2 trillion won LSEG SmartEstimate.
That would be its weakest in six quarters, down from 10.4 trillion won in the same period a year earlier and 6.7 trillion won in the preceding quarter.
Revenue would likely fall 0.1% to 74 trillion won from a year earlier, the filing showed.
Samsung attributed chip profit falls partly to inventory value adjustments, without elaborating. Analysts said unsold HBM chips to Nvidia may have contributed to the large inventory writedowns.
They estimated the chip division’s operating profit could come in around 500 billion won, down over 90% from a year earlier, while its phone business profit may have improved during the period.
Samsung Electronics shares slipped 0.2% against a 1.2% rise in the benchmark KOSPI as of 0341 GMT.
It said it plans to buy back 3.9 trillion won ($2.85 billion) worth of its shares, part of a 10 trillion won buyback announced last November.
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