Samsung’s Q2 profit plunges to $3.6b

Samsung Electronics reported a second-quarter operating profit of 4.7 trillion Korean won (US$3.6 billion), down sharply from 10.44 trillion won (US$7.49 billion) a year earlier and below market expectations.

The South Korea-based company is a major manufacturer of memory chips, semiconductors, and smartphones.

Quarterly revenue was 74.6 trillion won (US$57.4 billion), a slight increase from 74.07 trillion won (US$54.2 billion) last year.

Samsung’s chip business recorded an operating profit of 400 billion won (US$290.4 million), down from 6.45 trillion won (US$4.67 billion) a year earlier, with revenue in the segment falling to 27.9 trillion won (US$20.15 billion).

The company attributed the decline in chip profits to inventory adjustments and one-off costs related to export restrictions affecting non-memory products.

Samsung’s mobile and networks division posted a second-quarter operating profit of 3.1 trillion won (US$2.22 billion), up from 2.23 trillion won (US$1.6 billion) last year, with revenue rising to 29.2 trillion won (US$20.97 billion).

The company expects its foundry business to benefit from a recent US$16.5 billion chip supply contract.

🔗 Source: CNBC

🧠 Food for thought

1️⃣ US export restrictions create cascading effects beyond direct sales

Samsung’s profit collapse reveals how geopolitical trade restrictions can systematically dismantle business operations across multiple divisions.

The company’s foundry business, heavily reliant on Chinese demand, faced significant inventory charges for unsold AI chips due to US export restrictions1. This forced Samsung to operate its high-tech factories below capacity, creating a double impact of lost revenue and continued fixed costs2.

The restrictions also triggered inventory value adjustments across Samsung’s memory division, demonstrating how trade barriers create accounting losses even on products already manufactured3.

Samsung’s struggle illustrates the broader challenge facing semiconductor companies caught between maintaining Chinese market access and complying with US technology controls, a balance that has become increasingly difficult to maintain as restrictions tighten.

2️⃣ Samsung loses critical ground in the AI chip race to specialized competitors

Samsung’s semiconductor struggles reflect a deeper competitive shift where specialized players are outmaneuvering diversified giants in high-value AI applications.