Samsung's second-quarter profit plunged by 56%, and the predicament of its chip business intensified

Samsung Electronics' profit in the second quarter was 4.6 trillion won, a significant year-on-year decline of 56%. This is the first time since 2023 that Samsung has experienced a decline in profits, and the drop has exceeded market expectations.

This reflects that Samsung's chip business has been continuously losing market share in the era of artificial intelligence (AI).

Samsung's revenue in the second quarter remained flat at 74 trillion won. The company plans to release the full report later in July.

Samsung disclosed that the decline in profits was mainly due to weak demand from China and a drop in capacity utilization. Bloomberg Intelligence analyzed that Samsung's chip business may be affected by the US regulations restricting the export of AI chips to China and the increase in tariffs on electronic products.

Under the upsurge of AI infrastructure construction, Samsung has been overtaken by its rivals SK Hynix and Micron in the high-frequency wide memory (HBM) market.

In the era of AI computing, HBM (High Bandwidth Memory, or high-frequency bandwidth memory) holds a pivotal position. With the emergence of ChatGPT in 2023, it has witnessed explosive growth.

The technology significantly enhances data processing speed by vertically stacking multiple DRAM (Dynamic Random Access Memory) chips, surpassing the capabilities of traditional DRAM. It is a high-value and high-performance product. Since the birth of the first generation of HBM, this technology has developed to the sixth generation, including HBM2, HBM2E, HBM3, HBM3E, and the most advanced HBM4 of today.

According to a report released by the analysis firm Bernstein in June, it is expected that SK Hynix's market share in the HBM market will reach 57% in 2025, Samsung 27%, and Micron 16%.

Bloomberg Intelligence analysts said that SK Hynix has become Nvidia's main HBM4 supplier and delivered the world's first batch of 12-layer HBM4 samples ahead of schedule. Samsung, on the other hand, had to modify its HBM3E design and failed to obtain NVIDIA's early certification.

This defeat has kept Samsung lagging behind in the highly competitive and lucrative AI market. Despite the failure on HBM4, some investors of Samsung still expect the company's performance to bottom out and rebound.

At an earlier shareholders' meeting, Jeon Young-hyun, the head of Samsung's chip business, said that with the lessons learned from the past, Samsung promised not to repeat the same mistakes in the HBM4, and the next-generation memory chips are expected to be used in NVIDIA's Rubin graphics processing unit (GPU) architecture.

Bloomberg Intelligence also said that due to the influence of seasonal factors, Samsung's profits in the third quarter may rebound.

In addition, Samsung recently announced the repurchase of 3.9 trillion won worth of stocks to boost investor confidence. Samsung's share price rose and fell on Tuesday (July 8th) in the Seoul stock market.