With rivals like SK Hynix surging ahead in the booming AI race, Samsung braces for a 21% profit slump as AI chip demand weakens and foundry losses mount.
Samsung Electronics is expected to report a 21% decline in first-quarter operating profit, with losses driven by weak demand for artificial intelligence chips and continued struggles in its contract chip manufacturing business.
According to a Reuters report, the South Korean tech giant, which leads the global memory chip market, is navigating a leadership shake-up following the unexpected death of co-CEO Han Jong-Hee in March.
Analysts predict a 5.2 trillion won (£3.6 billion) operating profit for the January–March period, down from 6.6 trillion won a year earlier, according to LSEG SmartEstimate. Despite increased smartphone shipments, the overall performance is dampened by declining chip prices and intense competition.
Samsung has fallen behind rival SK Hynix in the supply of high-performance memory chips to AI leader Nvidia. This has left Samsung more reliant on Chinese customers seeking lower-end chips that are not affected by U.S. export restrictions.
Demand for AI chips in China also slowed in the first quarter after a strong end to 2024, reducing sales of high bandwidth memory (HBM) chips. Analysts noted that this likely caused a dip in DRAM profitability.
Commodity chip prices further dragged down performance. DRAM chip prices fell 25% year-on-year, while NAND flash prices dropped by about 50%, according to TrendForce.
Samsung’s foundry division remains unprofitable and may postpone the opening of its US factory to 2027 due to a lack of major contracts. Initially, the launch was set for 2024.
While the mobile and network division is expected to post a 3.7 trillion won profit—up from 3.5 trillion won—overall, Samsung is still forecast to underperform SK Hynix, which is benefiting from stronger AI chip demand.
Tariffs from the US also threaten to raise costs for Samsung’s consumer electronics products.
