Samsung's Chip Profits Crash 94% — AI Demand, Tesla Deal, HBM3E Ramp Offer Hope For 2H Comeback As Trump Hits South Korea With 15% Tariff

Samsung Electronics reported a 93.84% drop in semiconductor profits for Q2 2025, with operating profit at 400 billion won ($287 million). Despite this, the company anticipates a recovery in the second half, driven by AI demand and a $16.5 billion chip deal with Tesla. Overall, Samsung's total operating profit was 4.7 trillion won ($3.37 billion), marking its weakest performance in six quarters. The stock fell 1.65% to 71,400 KRW ($51.41), but is up 33.71% year-to-date.

Samsung Electronics Co. Ltd. SSNLF has projected a gradual second-half recovery for its semiconductor business after second-quarter operating profit at the division plunged 93.84% from a year earlier, driven by U.S. export restrictions on advanced chip sales to China and inventory adjustments.

Chip Division Posts Weakest Performance in Six Quarters

The South Korean tech giant’s Device Solutions division posted an operating profit of 400 billion won ($287 million) during the April-June period, down from 6.5 trillion won ($4.67 billion) a year earlier. This marked the first time in six quarters that chip division profits dropped below the 1 trillion won mark.

Samsung reported a total operating profit of 4.7 trillion won ($3.37 billion) for the second quarter of 2025, its weakest performance in six quarters. Revenue rose 0.7% year-over-year to 74.6 trillion won ($53.5 billion), according to the company’s Thursday earnings report.

AI Demand Expected to Drive Recovery

Samsung expects the industry environment to improve in the second half, driven by demand for artificial intelligence from continued investments by major cloud service providers. The company cited “proactive addressing of server demand by expanding HBM3E sales” and growth in high-density DDR5 products.

However, Samsung warned of concerns about slowing global growth due to an uncertain trade environment and geopolitical risks, particularly following U.S. President Donald Trump‘s announcement of 15% tariffs on South Korean goods.

Tesla Partnership Bolsters Foundry Business

The earnings announcement came days after Tesla Inc. TSLA confirmed a $16.5 billion deal to source chips from Samsung through 2033. The partnership involves manufacturing Tesla’s next-generation AI6 chips at Samsung’s Texas facility, potentially strengthening the company’s struggling foundry business.

Samsung’s foundry division remained weak despite significant revenue growth, with earnings impacted by inventory value adjustments stemming from U.S. export restrictions and prolonged low utilization at mature nodes.

Memory Business Shows Mixed Results

The Memory division saw sales increase 11% quarter-over-quarter to 21.2 trillion won ($15.2 billion), though down 3% year-over-year. Samsung expanded HBM3E sales to address server demand while significantly reducing NAND inventory through the expansion of server SSD sales.

For the second half, Samsung plans to increase high-density, high-performance SSD production while accelerating the transition to 8th Generation V-NAND across all applications. The company aims to expand sales of industry-leading 128GB DDR5 and 24Gb GDDR7 for AI servers.

Price Action: Samsung traded at 71,400 KRW ($51.41) on Thursday on the South Korean exchange, down 1,200 KRW ($0.86) or 1.65% as of 12:23 p.m. local time. The stock is up 18,000 KRW ($12.97) or 33.71% year to date.

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