Samsung Profit Falls 55% as AI Chip Race Intensifies
Samsung Electronics has reported a sharp 55% drop in second-quarter operating profit, falling to ₩4.7 trillion ($3.4bn) from ₩10.4 trillion ($7.5bn) a year earlier, as the company continues to lose ground in the fast-growing artificial intelligence chip market.
The firm’s once-dominant semiconductor division – historically its biggest profit driver – saw operating earnings plunge 94% year-on-year, hit by low factory utilization, inventory write-downs, and the impact of US restrictions on advanced chip exports to China.
Samsung’s stock slipped nearly 2% after the results were released, before recovering some losses. The results confirm an earlier profit warning issued by the company this month.
Analysts say Samsung’s struggles stem from missteps in anticipating demand for high-bandwidth memory (HBM) – a critical component for AI processors used by Nvidia and AMD. While rivals SK Hynix and Micron secured early orders, Samsung’s most advanced HBM chips have repeatedly failed Nvidia’s performance tests.
“Samsung was slow to recognize the AI boom and bet on less promising technologies,” said Sanjeev Rana of brokerage firm CLSA, noting that its contract chipmaking business is also underutilized despite heavy investment.
The company’s foundry division, once seen as a challenger to Taiwan’s TSMC, continues to trail with just 8% global market share compared to TSMC’s 68%, according to TrendForce.
A potential turning point came this week after Tesla CEO Elon Musk confirmed a $16.5bn deal for Samsung to manufacture its next-generation AI6 chips at a new plant in Taylor, Texas. Samsung’s shares jumped nearly 7% following the announcement.
Although mass production is expected to begin in 2027, analysts say the agreement could improve investor sentiment and help boost utilization of Samsung’s new facilities.
The deal follows Samsung’s earlier delays in starting operations at the Texas plant, which had struggled to attract major clients.
Looking ahead, Samsung says it will focus on high-value and AI-related products to regain competitiveness in advanced semiconductors. However, analysts warn that the company faces a steep climb as SK Hynix recently overtook Samsung as the world’s largest DRAM supplier, while TSMC continues to dominate the foundry market.
