Samsung Electronics has posted a disappointing second-quarter performance, falling well short of market expectations.

The weak results are attributed to sluggish sales of high-bandwidth memory (HBM) semiconductors and a decline in foundry utilization caused by U.S. export restrictions on China. As Samsung aims for a rebound in the second half of the year, expanding its HBM-related revenue has emerged as a top priority.

On July 8, Samsung announced in a preliminary earnings report that its consolidated operating profit for the second quarter stood at 4.6 trillion won, a 55.94 percent decline from the same period last year. Revenue came in at 74 trillion won, down 0.09 percent year-on-year. These figures are significantly below analysts’ forecasts, which had projected 76.5 trillion won in revenue and 6.4 trillion won in operating profit.

The steep decline is mainly due to continued underperformance in the Device Solutions (DS) division, which oversees the semiconductor business, and the recognition of inventory valuation losses. These valuation losses are provisions that account for the expected decline in the value of inventory held by the company.

Industry insiders estimate that inventory-related provisions in the DS division may have reached up to 1 trillion won in the second quarter. Demand has plummeted for NAND flash, while HBM2 and HBM2E products, blocked from export to China since early this year due to U.S. sanctions, are reportedly accumulating in inventory.

In its filing, Samsung acknowledged, “Profits in the DS division declined quarter-on-quarter due to inventory write-downs and the impact of export controls on advanced AI chips targeting China.” The company’s foundry business, which has been posting trillion-won-level losses each quarter since last year, continued to struggle this quarter.

The impact of U.S. sanctions on China was especially significant. Export restrictions on advanced AI semiconductors to China led to decreased utilization rates in Samsung’s foundry operations, directly resulting in financial losses.

Other factors include a weakening in the Korean won–U.S. dollar exchange rate and the fading impact of the Galaxy S25 launch, which bolstered company-wide performance in the first quarter.

Despite the downturn, Samsung is eyeing a turnaround in the second half of the year.

Samsung is currently supplying 12-layer HBM3E chips for AMD’s latest graphics processing units (GPUs), widely seen as Nvidia’s sole competitor, and is also undergoing HBM qualification tests with Nvidia and other clients. Gradual recovery in foundry utilization is expected to reduce losses moving forward.

Still, a full recovery hinges on boosting HBM sales.

While supplying HBM to AMD has somewhat eased concerns about Samsung’s technological competitiveness, the company faces a clear limitation if it fails to enter Nvidia’s ecosystem, which accounts for over 80 percent of the AI chip market.

To prevent a further decline in its stock price following the weak earnings report, Samsung also announced a share buyback plan.

The company will repurchase 3.91 trillion won worth of shares, of which 2.81 trillion won will be canceled to support the stock price. The remaining 1.1 trillion won will be used for employee incentives. On the same day, Samsung’s stock closed at 61,300 won, down 0.65 percent from the previous trading session.

Samsung is scheduled to release detailed earnings by the business division for the second quarter on July 31.