Samsung Electronics’ semiconductor division reported just 400 billion won in operating profit for the second quarter of this year, its lowest quarterly figure since posting a 2-trillion-won loss in the fourth quarter of 2023 and a steep 6-trillion-won decline year-on-year.

The underperformance is attributed largely to weakened competitiveness in high-bandwidth memory (HBM), a high value-added segment, and poor results in the non-memory foundry business.

On July 31, Samsung announced its consolidated second-quarter earnings, reporting 74.57 trillion won in revenue and 4.68 trillion won in operating profit. While revenue was up 0.67 percent from the same period last year, operating profit plunged 55.23 percent.

The Device Solutions (DS) division, which oversees the semiconductor business, posted 27.9 trillion won in revenue and 400 billion won in operating profit. That is just one-third of its first-quarter profit (1.1 trillion won) and a 93.8 percent drop compared to the 6.45 trillion won posted in the same period last year.

The poor performance is mainly due to sluggish non-memory operations. Market analysts estimate the memory business generated over 3 trillion won in operating profit, while the system LSI and foundry segments likely suffered combined losses in the upper 2-trillion-won range.

Samsung cited impairment losses related to inventory valuation in the memory segment and additional write-downs in non-memory due to U.S. sanctions on China as key negative factors. Impairment losses on inventory occur when companies preemptively reflect expected declines in inventory value in their financial statements.

Meanwhile, the Device eXperience (DX) division, which includes TVs, home appliances, and smartphones, recorded 43.6 trillion won in revenue and 3.3 trillion won in operating profit. Both figures declined from the previous quarter due to waning effects from new smartphone launches and intensified competition in the TV market.

During a conference call, Samsung CFO Park Soon-chul said, “We expect the second quarter to mark the bottom, with a recovery in the second half,” referring to a “low-first-half, high-second-half” trajectory. Despite global economic slowdown concerns, Samsung forecasted improving IT market conditions led by growth in artificial intelligence (AI) and robotics.

After losing ground in the AI memory market, particularly in HBM, Samsung is now pushing to “normalize” its HBM operations. The company is seeking to supply its fifth-generation HBM3E products to Nvidia and is also preparing for mass production of sixth-generation HBM4 chips. Chip division executive vice president Kim Jae-joon said, “We’ve completed development of HBM4 based on the 1c (sixth-generation 10 nm-class) process and shipped samples to major customers.”

The struggling foundry business received a rare boost recently by signing a 22.8 trillion won AI chip supply deal with Tesla, offering a potential turnaround.

Noh Mi-jung, executive director of the Foundry Business, said, “We expect additional major client wins in the near future,” and added that “capital expenditures (CapEx) would increase next year compared to 2025, in preparation for the opening of Samsung’s new factory in Taylor, Texas, in 2026.”

However, U.S. tariffs on semiconductor products remain a potential risk. CFO Park said, “The scope of the U.S. investigation into chip tariffs includes finished products such as smartphones, tablets, PCs, and monitors. This could have a significant impact on our business.” He added that “Samsung is conducting a multifaceted analysis of potential risks and will devise response measures to minimize their effects.”