Samsung cites US AI chip restrictions on China as the reason for its significant Q2 profit miss
Samsung Electronics (005930.KS), opens new tab, said on Tuesday that its operating profit for the second quarter would drop 56% from the same time last year. This was much worse than what experts had expected because sales of its AI chips in the US and China slowed down.
The biggest memory chipmaker in the world said that the drop in profits was because of U.S. restrictions on advanced AI chips for China. However, analysts said that the drop in profits was also due to delays in sending chips to Nvidia (NVDA.O), an important U.S. customer.
In a statement released on Tuesday, Samsung said that its improved high-bandwidth memory (HBM) goods were being tested by customers and would be shipped soon, but it didn’t say anything else.
“The DS Division recorded a quarter-on-quarter decline in profit due to inventory value adjustments and the impact of U.S. restrictions on advanced AI chips for China,” Samsung said in a report.
Samsung thought it would make an operating profit of 4.6 trillion won from April to June, while LSEG SmartEstimate said it would make 6.2 trillion won.
It was down from 10.4 trillion won in the same time last year and 6.7 trillion won in the previous quarter, making that the weakest quarter in six years.
The report showed that sales would probably go down 0.1% from the previous year to 74 trillion won.
Investors will have more doubts about Samsung’s fundamentals because of the earnings miss. However, Greg Roh, head of research at Hyundai Motor Securities, said that the company’s earnings should slowly return in the third quarter thanks to new phone launches and higher sales of HBM chips to customers other than Nvidia.
“The worse-than-expected profit will be negative for investor sentiment,” said the CEO.
As a result of U.S. export restrictions on advanced AI chips to China and continued low utilization rates, Samsung said earnings in its foundry business also went down. This was due to sales limits and related inventory value adjustments.
Reuters said that the US told Taiwan Semiconductor Manufacturing Co (2330.TW), opens new tab, to stop sending advanced chips to Chinese customers that are often used in AI apps last year.
Samsung said that it thinks the financial loss in its foundry business will get smaller in the second half of the year as demand slowly rises again.
In late July, the company should share full results that include a breakdown of how much money each of its businesses made.
