Samsung Electronics recorded an 'earnings shock' in the second quarter (April to June) of this year, falling significantly short of market expectations. The critical component of artificial intelligence (AI) semiconductors, the high bandwidth memory (HBM) business, performed worse than anticipated, and the foundry (semiconductor manufacturing) division continued to incur operating losses of over 2 trillion won despite expectations of reducing its deficit.
Samsung Electronics announced on the 8th that it recorded a consolidated revenue of 74 trillion won and an operating profit of 4.6 trillion won for the second quarter of this year. This marks a decrease of 0.1% in revenue and 55.9% in operating profit compared to the second quarter of last year. The operating profit was significantly below the already lowered market forecast of 6.3 trillion won. In the securities sector, analysts had drastically lowered their expectations for Samsung Electronics' second-quarter operating profit by about 2 trillion won over the past month, but the actual performance was even worse.
◇ Earnings shock amid AI rally... HBM and foundry struggles hinder growth
The second-quarter performance is summarized by the underperformance of Samsung Electronics' cash cow, the semiconductor business. While Samsung Electronics did not provide detailed results by business sector in its provisional results, analysts in the securities sector estimate that the operating profit in the semiconductor (DS) sector was around 400 billion won, nearly a 94% plunge compared to the second quarter of last year (6.45 trillion won).
In particular, the HBM business, which had garnered market expectations, was a major setback. Kim Sun-woo, a researcher at MERITZ Securities, noted, "There is a possibility that HBM sales, which should have acted as a growth driver, may have decreased compared to the previous quarter" and added, "The situation for quality certification and orders from U.S. clients remains distant."
Not only HBM, but other semiconductor businesses also faced difficulties. The foundry and system LSI sectors are estimated to have incurred operating losses of over 2 trillion won, according to analysts in the securities sector. The foundry division has struggled to secure clients in advanced processes, continuing to record monthly deficits in the trillions of won since the fourth quarter of last year. It is also estimated that the NAND flash memory business has continued to incur losses as prices fell. Additionally, as transactions in semiconductors are conducted in dollars, the sharply declining won-dollar exchange rate since June has also negatively impacted performance.
In response, Samsung Electronics explained, "The memory sector incurred one-off expenses such as provisions due to inventory asset evaluations, but improved HBM products are being evaluated and shipped sequentially with clients." They also stated, "The non-memory (foundry) business underperformed due to constraints on advanced AI chip sales and reduced operating rates; however, we expect that the deficit will decrease as demand recovers in the second half of the year."
The smartphone business is considered the only sector that performed well. Thanks to the effects of new product launches such as the Galaxy S25 Edge and cost reductions, the smartphone business is estimated to have generated an operating profit of about 3 trillion won. Analysts in the securities sector believe that the Galaxy smartphone shipments in the second quarter were around 56 million units, slightly exceeding expectations.
In the home appliance sector, demand weakness and tariff impacts are expected to keep operating profits between 100 billion and 300 billion won in the second quarter, according to analysts in the securities sector. Samsung Display is estimated to have generated an operating profit of 500 billion to 700 billion won. Although this represents an improvement compared to the previous quarter, it is analyzed that profitability has decreased compared to the same period last year (1 trillion won).
◇ Expectations for a rebound in the third quarter, but... 'The HBM situation remains unfavorable'
In the electronics industry and the securities sector, analyses suggest that Samsung Electronics' performance will rebound in the third quarter. With the HBM supply that had been delayed beginning in earnest and the seasonal effects in the display and smartphone sectors, there are positive forecasts that operating profits could recover to the 8 trillion won range.
Park Yoo-ak, a researcher at Kiwoom Securities, noted, "Sales of the HBM business are expected to increase against major clients such as AMD, leading to operating profits in the semiconductor sector rising to the low 4 trillion won range in the third quarter" and added, "The foundry and system LSI businesses will also likely see a reduction in operating deficits due to entering the seasonal peak and increased sales of Exynos."
However, some also caution that it may be too early to be overly optimistic about the second half's results. This is because they are falling behind in the HBM competition and the possibility of reduced demand for semiconductors and IT devices due to macroeconomic uncertainties remains.
Chae Min-sook, a researcher at Korea Investment Securities, said, "As Samsung Electronics certifies the HBM3E 12-layer products (to NVIDIA), competitors SK hynix and Micron aim to complete certification for the next-generation HBM4 12-layer products." She added, "Entering a market where competitors are leading as a third supplier is not a favorable situation." Lee Su-rim, a researcher at DS Investment Securities, noted, "In the second half, the impact of pre-orders due to tariffs will fade, which could lead to adjustments in DRAM prices."