That’s a steeper decline than market consensus, The Wall Street Journal reported Tuesday (July 8). Samsung is forecasting operating profit equivalent to about $3.34 billion, the South Korean tech giant’s first profit decline since the fourth quarter of 2023.
Samsung chalked up this gloomy projection in part to a one-off recognition of inventory value losses tied to U.S. export controls that limit sales of advanced AI chips to the crucial Chinese market, according to the report.
“Analysts said some of the weakness was due to a delay in supplying advanced high-bandwidth-memory products to Nvidia,” the report said.
Additionally, Samsung has struggled to keep pace with smaller chip-making competitors SK Hynix and Micron Technology, which have benefited from robust sales of higher-end AI chips, according to the report.
Samsung said that “customer evaluation and shipments of its advanced memory chips are proceeding, while operating losses in its nonmemory business, which includes its contract chip-making and logic chip-designing segments, are expected to narrow in the second half of the year due to a gradual recovery in demand,” per the report.
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Meanwhile, uncertainty over U.S. trade policy has increased concerns about Samsung’s smartphone business, which was healthy enough in the first quarter to balance out weakness in its semiconductor division, according to the report.
President Donald Trump has threatened to place a new levy on smartphones shipped to the United States, along with higher duties on auto, steel and aluminum imports, per the report.
“On Monday, he said South Korea and other trading partners will face separate ‘reciprocal tariffs’ if they fail to reach trade deals before the new Aug. 1 deadline,” the report said.
The tariffs have led Samsung and other smartphone makers to begin sourcing more inventory from India, PYMNTS reported in May.
Meanwhile, tariff troubles do not only affect larger companies like Samsung but also middle-market companies.
“This sudden imposition or threat of trade restrictions has left procurement teams scrambling and CFOs revising margin forecasts quarterly,” PYMNTS reported Tuesday.
Mid-market firms have stopped thinking of AI as futuristic and instead see it as foundational to their future growth plans and present-day survival. The bulk of AI deployment is not consumer-facing, but happening in demand forecasting, dynamic pricing, transportation routing and real-time inventory optimization.
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