Samsung reports severe financials with a 94% drop in chip business profits

Samsung faces a huge 94% drop in chip profits, but sees hope in AI growth.

: Samsung Electronics has recently released its second-quarter financial results, revealing a severe decline in its chip business, with profits dropping by 93.8%. This decrease marks a continuation of struggles in their Device Solutions division, significantly impacting their overall profits despite a slight revenue increase to 74.6 trillion won. Company CFO Soon-cheol Park cites tariff impacts and export restrictions on China as key factors but optimistically notes potential recovery with AI and robotics momentum. Meanwhile, Samsung's mobile division experienced better outcomes, showing strong sales from its Galaxy lineup and helping bolster optimism for the year's second half.

Samsung Electronics has reported a dramatic drop in profits from its chip business, falling by 93.8% year-over-year to only 400 billion won ($288 million). This decline is a stark reminder of the tech giant's ongoing struggles within its Device Solutions division, which encompasses memory chip manufacturing and semiconductor design. Although the revenue for the quarter slightly increased to 74.6 trillion won ($53.7 billion), the operating profits plunged to 4.7 trillion won ($3.38 billion) due to these chip challenges. The downturn was worse than what the company had previously forecasted.

According to Samsung's CFO, Soon-cheol Park, this profit slump stems from several critical global and political factors. The enduring impact of tariffs and export restrictions on China, conceived during the Trump administration, played a considerable role in this financial evaluation. Despite these challenges, Park remains hopeful for a modest recovery in the IT sector, largely propelled by innovations in AI and robotics.

As Samsung navigates these financial headwinds, there is some optimism for the future. The company has cited ongoing negotiations between South Korea and the U.S. as a means to manage market uncertainties. Although additional semiconductor tariffs from Washington might be looming, there is a prevailing belief within Samsung's management that their industry foresight and strategic initiatives will spur growth. The potential increase in foundry revenue, particularly through the mass production of next-generation 2nm chips for mobile devices, underscores this optimistic outlook.

However, Samsung acknowledges that their foundry operations are at a critical junction, with Neil Shah from Counterpoint Research warning of the delicate balance between survival and profitability. Competitors like TSMC and SK Hynix present formidable challenges in this domain. Nonetheless, Samsung's recent contract with Tesla to produce AI6 chips is a promising sign. This partnership is expected to bolster their chip business, demonstrating the value Samsung can deliver in high-stakes tech collaborations.

Despite these struggles in semiconductors, Samsung's mobile division has fared better, reporting an increase in operating profits to 3.1 trillion won. Their Galaxy S25 and A series phones, as well as the Galaxy tablets, have seen robust sales, and their introduction of foldable phones is set to counter growing competition from Chinese brands. The division's performance is a bright spot in Samsung's overall financial profile, providing a silver lining amid their chip troubles.

Sources: TechSpot, CNBC

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