Samsung Q1 2025 Profit Falls 21% Amid Weak AI Chip Sales & Foundry Struggles

Samsung Forecasts Steep Q1 Profit Decline Amid Weak AI Chip Sales and Foundry Headwinds

SEOUL – April 7, 2025 – South Korean tech titan Samsung Electronics Co., Ltd. (KRX: 005930) is bracing for a significant 21% year-over-year decline in its first-quarter operating profit, underscoring the mounting challenges in its semiconductor and contract manufacturing businesses.

According to industry analysts and preliminary guidance due on Tuesday, the company is expected to post an estimated ₩5.2 trillion (USD $3.62 billion) in Q1 2025 operating profit—down from ₩6.6 trillion during the same period last year.

AI Chip Momentum Falters, SK Hynix Gains Edge

The world’s largest memory chip manufacturer has been steadily losing ground in the high-bandwidth memory (HBM) segment, a crucial component for AI workloads and GPUs. Competitor SK Hynix Inc. (KRX: 000660) has surged ahead in capturing high-margin deals, especially from dominant AI player NVIDIA Corporation (NASDAQ: NVDA).

While Samsung remains a key global supplier of DRAM and NAND flash memory, it has struggled to deliver cutting-edge HBM3 and HBM3E modules at scale. This shortfall comes as NVIDIA and other U.S. chipmakers ramp up demand for AI-ready memory solutions amidst the generative AI boom.

“Samsung’s HBM output is lagging due to technological integration issues with heat dissipation and stacking yield,” said Lee Seung-woo, a chip industry analyst at Eugene Investment & Securities.

China Dependency and U.S. Export Pressures

In the absence of strong AI chip partnerships with Western firms, Samsung has leaned on demand from Chinese customers. However, this market segment also faces volatility, with chip buyers in China front-loading purchases in Q4 2024 amid fears of tighter U.S. export restrictions, contributing to reduced Q1 sales.

“Chinese clients stocked up in anticipation of further U.S. sanctions,” said Ryu Young-ho from NH Investment & Securities, noting that Q1 shipments fell significantly.

Foundry Losses Mount; U.S. Factory Delayed

Samsung’s foundry division—its contract chip manufacturing unit—continues to operate in the red. The company is now reportedly postponing the commercial ramp-up of its $17 billion Taylor, Texas plant to 2027, citing the lack of major production orders and advanced process node readiness.

Unlike Taiwan Semiconductor Manufacturing Co. (NYSE: TSM), Samsung Foundry has struggled to attract large-scale clients for advanced nodes like 3nm GAA (gate-all-around), a technology it was first to market with but failed to commercialize effectively.

Commodity Chip Exposure Weighs on Margins

Samsung’s overreliance on commodity chips has made it more vulnerable to price fluctuations. According to TrendForce, DRAM prices fell ~25% and NAND flash prices declined nearly 50% year-over-year in Q1, compounding profitability woes across its semiconductor division.

Analysts estimate the chip division posted just ₩1.7 trillion in Q1 profit—down from ₩1.9 trillion a year earlier. In contrast, SK Hynix is projected to double its profit due to higher HBM shipments and stronger pricing power.

Mobile Division Offers Silver Lining

The Mobile eXperience (MX) division, which includes Samsung’s Galaxy smartphones and network equipment, offered some relief. It is projected to generate ₩3.7 trillion in profit, up from ₩3.5 trillion last year. Strong shipments of the Galaxy S24 Ultra, coupled with currency tailwinds from a weaker Korean won, helped bolster earnings.

Geopolitical Frictions and Tariff Risks Loom

In addition to internal challenges, Samsung faces rising external threats. The renewed tariff regime under U.S. President Donald Trump’s administration has reintroduced reciprocal duties on consumer electronics, clouding the outlook for Samsung’s exports of smartphones, TVs, laptops, and home appliances.

“Tariff escalation could depress global demand and force Samsung to rethink its supply chain strategy,” said Jeff Kim, research head at KB Securities, noting that relocating production is a multi-year process.

📊 Samsung Q1 2025 Snapshot (Estimates)

Outlook: Recovery Hinges on AI, Foundry Wins

Samsung is actively working on revamping its HBM chip architecture to better serve clients like NVIDIA and Advanced Micro Devices (NASDAQ: AMD), while attempting to win new foundry contracts in the U.S., Japan, and Europe.

However, with persistent geopolitical risk, rising competition from China’s YMTC in NAND, and internal leadership changes following co-CEO Han Jong-Hee’s death, the road to recovery is uncertain.

Samsung Electronics will release its official earnings guidance on Tuesday, April 9, 2025, followed by a detailed earnings call later this month.