Samsung's operating profit nose-dives on pressure on China takes chunk out of chips
Published: 08 Jul. 2025, 18:37
Updated: 08 Jul. 2025, 18:56
Audio report: written by reporters, read by AI
![A Samsung Electronics flag waves at the company's Seocho building in southern Seoul on April 30. [NEWS1]](https://koreaseafood.online/data/photo/2025/07/08/3099a16d-1a1f-48de-bdb0-91c63e57e7ad.jpg)
A Samsung Electronics flag waves at the company's Seocho building in southern Seoul on April 30. [NEWS1]
Samsung Electronics' operating profit more than halved in the second quarter of this year, following a similar drop for LG Electronics, underscoring the intensifying impact of China on Korea's electronics and semiconductor industries as an export market, competitor and manufacturing base.
On Tuesday, Samsung Electronics announced its preliminary earnings for the second quarter of 2025, reporting 74 trillion won ($54.1 billion) in revenue and 4.6 trillion won in operating profit — down 0.09 percent and 55.94 percent, respectively, from the same period last year.
While revenue remained largely flat, operating profit fell short of market expectations of around 6 trillion won, meaning a significant earnings shock for investors.
The company did not disclose details on performance by division, but industry analysts said its Device Solutions division — which includes the foundry, system LSI and memory businesses — likely saw continued losses in foundry and system chip design and limited improvement in high-end memory such as high bandwidth memory (HBM).
The second quarter is typically an off-season for Samsung’s Mobile eXperience division, as the boost from new smartphone releases fades. The TV and home appliance segments were affected by weak consumer demand and lingering effects from U.S. tariffs imposed by the Trump administration. In the first quarter of 2025, robust smartphone sales had offset weak chip performance, but no such buffer existed this time.
In a rare move, Samsung issued a separate explanation highlighting key factors behind the earnings decline. It cited “inventory-related provisions and the impact of U.S. sanctions on advanced AI chips sold to China” as key reasons for the drop.
![[SAMSUNG ELECTRONICS]](https://koreaseafood.online/data/photo/2025/07/08/38066c2b-bd00-483a-96ac-e51fdeda65c2.jpg)
[SAMSUNG ELECTRONICS]
The company said it had to write down the value of older HBM inventory that it may not be able to sell and noted that its nonmemory business faced export restrictions to China due to U.S. sanctions on advanced semiconductors.
A Samsung representative added that because it had proactively written off inventory in advance, there was potential for a rebound in the second half of the year if inventory clears through sales.
China: Market, rival and production base
China continues to be a complex variable for Korea's electronics industry. For Samsung's chip business, the upheaval in the Chinese export market has been particularly painful. As of Jan. 1, the U.S. government banned all exports of HBM to China, leading to a sharp decline in the sales of Samsung's older HBM.
While Samsung has begun supplying its latest 12-layer HBM3E fifth-generation chips to AMD, it has yet to enter the supply chain of Nvidia, the dominant player in the AI chip market. That leaves Samsung squeezed out of the U.S. market while facing restrictions in China.
![An aerial view of Samsung Electronics' chip complex in Pyeongtaek, Gyeonggi [SAMSUNG ELECTRONICS]](https://koreaseafood.online/data/photo/2025/07/08/d8ac1d98-64d3-4148-a80e-026e29a3e0b9.jpg)
An aerial view of Samsung Electronics' chip complex in Pyeongtaek, Gyeonggi [SAMSUNG ELECTRONICS]
Samsung's foundry business faces similar headwinds. Since 2019, it has been producing advanced AI chips for the Chinese tech firm Baidu.
However, with tightened U.S. sanctions restricting sales to China and no major U.S. tech clients onboard, Samsung's foundry has seen utilization rates fall. The company recently reshuffled its foundry leadership and appointed Noh Mi-jung, a key figure in the Baidu partnership, to lead efforts to attract new clients.
LG Electronics on Monday also reported a 46.6 percent on-year decrease in its second quarter operating profit for 2025, largely due to fierce TV competition with Chinese brands. The ongoing tariff war and weakening consumer demand also undercut profit margins as Korean firms faced off against low-cost Chinese competitors.
SK hynix, meanwhile, faces risks tied to its Chinese production base. It currently manufactures about 40 percent of its DRAM and 20 percent of its NAND chips in China. Though the company maintains a technological edge and is Nvidia's primary HBM supplier, it is watching closely for any potential U.S. restrictions on chip production in China.
![CXMT plant in Hefei, Anhui Province, China [CXMT]](https://koreaseafood.online/data/photo/2025/07/08/8c2fde50-e19d-444b-b583-a717ed834df2.jpg)
CXMT plant in Hefei, Anhui Province, China [CXMT]
Adding to the uncertainty, Reuters reported Monday that Chinese DRAM maker ChangXin Memory Technologies, seen as a rising competitor to Korean chipmakers, has filed for an initial public offering on the Shanghai Stock Exchange Science and Technology Innovation Board market, China's equivalent of the Nasdaq, which could provide it with significant financial firepower.
Samsung Electronics share buyback
Samsung Electronics' board approved a 3.91 trillion won share buyback on Tuesday. Of the total, 2.81 trillion won worth of the shares will be retired to support the stock price and enhance shareholder value. The remaining 1.1 trillion won will go toward employee compensation.
The buyback is part of a previously announced plan in November to repurchase 10 trillion won in shares over a year. The company has already repurchased 6.1 trillion won in shares and will now execute the final 3.9 trillion won tranche. Samsung shares closed at 61,400 won on Tuesday, down 0.49 percent from the previous day.
Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY SHIM SEO-HYUN [[email protected]]
with the Korea JoongAng Daily
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