Samsung profits hit by AI chip delays, 39% decline expected in Q2

Samsung’s profit decline is largely due to delays in shipping HBM chips to Nvidia, as rivals like SK Hynix and Micron gain from AI-driven demand, while Samsung struggles with certification hurdles and export restrictions

Samsung Electronics is expected to report a 39% decline in second-quarter operating profit, reflecting mounting challenges in its advanced memory chip business and rising global trade uncertainty. Industry estimates suggest the South Korean tech giant will post an operating income of 6.3 trillion won (approximately $4.62 billion) for the April–June period, marking its weakest result in six quarters, according to LSEG SmartEstimate.

The profit slide is primarily attributed to delayed shipments of Samsung’s high-bandwidth memory (HBM) chips to Nvidia, a key customer in the rapidly expanding artificial intelligence sector. Rivals such as SK Hynix and Micron have already capitalized on robust demand for AI-optimized memory, while Samsung's progress has been hampered by slow certification processes and export restrictions.

Analysts say Samsung’s HBM3E 12-high chip, a critical component for next-gen AI applications, has not yet been certified by Nvidia. “HBM revenue likely remained flat in the second quarter, as China-related sales restrictions persist and Samsung has yet to begin supplying its 12-high HBM3E chips to Nvidia,” said Ryu Young-ho, a senior analyst at NH Investment & Securities. He added that meaningful shipments to Nvidia are unlikely in 2024.

Trade risks cloud Samsung outlook

Although Samsung has not confirmed the status of its Nvidia qualification, the company has begun supplying the chip to AMD, according to a June announcement by the U.S.-based firm.

Meanwhile, Samsung’s smartphone business has shown relative resilience, aided by pre-emptive stockpiling amid potential U.S. tariffs on non-domestic devices. However, broader uncertainty looms as the U.S. weighs new trade policies, including a possible 25% tariff on imported smartphones and tighter restrictions on technology exports to China, which could affect Samsung’s global supply chain.

Despite these pressures, Samsung’s share price has risen 19% year-to-date, although it trails behind a 27.3% gain in South Korea’s benchmark KOSPI index, making it the weakest performer among major global memory chipmakers.

As Samsung navigates intensifying competition in AI hardware and growing geopolitical risks, its ability to accelerate advanced chip certification and manage trade headwinds will be critical to regaining momentum in the second half of 2024.