Samsung Forecasts 21% Drop in Q1 Profit Amid Weak AI Chip Sales and Foundry Losses
- tech360.tv
- 6 hours ago
- 2 min read
Samsung Electronics is expected to report a 21% decline in first-quarter operating profit, impacted by sluggish artificial intelligence chip sales and ongoing losses in its contract chip manufacturing business.
The South Korean tech giant is projected to post an operating profit of 5.2 trillion won (USD 3.62 billion) for the January–March quarter, down from 6.6 trillion won a year earlier, according to LSEG SmartEstimate.
Samsung, the world’s largest memory chip maker, has struggled to keep pace with rival SK Hynix in supplying high-performance memory chips to Nvidia, a leader in AI chipsets.
The company’s reliance on Chinese customers for less advanced chips, which are not subject to U.S. export restrictions, has made it vulnerable to shifting demand.
Ryu Young-ho, senior analyst at NH Investment & Securities, said AI chip demand from China dropped in the first quarter after customers front-loaded purchases in the previous quarter due to concerns over further U.S. restrictions.
This likely led to a slight decline in the share of high bandwidth memory (HBM) chips in Samsung’s overall DRAM shipments, reducing DRAM profitability.
Samsung is currently developing a redesigned version of its most advanced HBM chips to meet client needs. However, its heavy exposure to commodity chips has left it more susceptible to price volatility.
Prices for some DRAM chips, commonly used in smartphones and PCs, fell about 25% year-on-year in the first quarter, while NAND flash chip prices, used in data storage, dropped around 50%, according to TrendForce.
As a result, Samsung is expected to underperform SK Hynix, whose profit is forecast to more than double from a year earlier due to strong AI chip demand.
The company is also facing increased costs from reciprocal tariffs imposed by the United States, affecting a wide range of products including smartphones, TVs, laptops and home appliances.
Jeff Kim, head of research at KB Securities, said Samsung may consider diversifying its production base as a mid-to-long-term strategy, though such changes would take more than a year or two.
Persistent tariffs on consumer electronics could dampen consumer demand, he added.
In its foundry business, Samsung is expected to delay the start-up of its new U.S. factory to 2027 from the previously planned 2026, as it has yet to secure major production orders. The plant was originally scheduled to open in 2024.
The chip division is estimated to report a Q1 operating profit of 1.7 trillion won, down from 1.9 trillion won a year earlier.
Meanwhile, Samsung’s mobile and network business is expected to post a profit of 3.7 trillion won, up from 3.5 trillion won a year ago, driven by increased smartphone shipments and gains from a weaker local currency.
Samsung expects Q1 profit to fall 21% to USD 3.62 billion
AI chip sales and foundry losses weigh on performance
DRAM and NAND chip prices dropped sharply in Q1
Source: REUTERS