Samsung profit slows after US-China trade war hits AI spending

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Samsung profit slows after US-China trade war hits AI spending.

companies :: 2025-04-30 :: source - bloomberg

By Yoolim Lee

(Bloomberg) — Samsung Electronics Co. (005930.KS) reported slower profit growth and softening demand for storage chips, a sign that the US-China trade war may be triggering cuts in artificial intelligence hardware spending.

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Executives at the chips-to-smartphones titan warned of heightened uncertainty for the rest of the year stemming from geopolitical tensions and US tariff policies.

Even before US President Donald Trump announced tariffs on almost all countries around the world, customers put some data center projects on hold, weakening demand for Samsung’s solid-state drives in the March quarter, an executive from the company’s memory business told analysts on Wednesday. Samsung’s total capital expenditure in the quarter fell more than 30% from the previous quarter to 12 trillion won ($8.4 billion).

The South Korean company’s flagship products such as semiconductors, smartphones and tablets are now exempt from the so-called reciprocal tariffs, but Trump has indicated that a tariff on the electronics supply chain including chips is in the works.

“There are a lot of uncertainties ahead of us,” said KL Roh, an executive vice president at Samsung.

Operating profit at Samsung’s chip division tumbled 42% to 1.1 trillion won due to declines in average selling price. Sales of its key high-bandwidth memory chips also fell due to export controls, with some clients also deferring orders in anticipation of upcoming enhanced HBM3E products, according to Samsung.

Its shares were down about 0.5% Wednesday afternoon in Seoul.

In recent high-profile trade talks, Seoul and Washington agreed to pursue a comprehensive package agreement by July 8, when the 90-day tariff pause is set to end.

Fears about what the final trade agreement would look like hang over Samsung’s outlook, outweighing a boost from customers stockpiling PC chip supplies ahead of US tariffs and a recovery in smartphone sales.

Donald Trump Jr. was in Seoul on Wednesday to meet with leaders of Korean conglomerates on the invitation of Shinsegae Group Chairman Chung Yong-jin, underscoring escalating concern in the country’s business community. Korean business leaders had asked Chung to facilitate the visit to establish contact with the Trump administration, according to local reports.

“Samsung is planning to ramp up the enhanced 12-layer HBM3E product in the second quarter to meet demand from some clients,” said Greg Noh, an analyst with Hyundai Motor Securities Co. (001500.KS) “But unless there is demand from Nvidia (NVDA), it’s difficult to expect dramatic improvement in the chip business.”

Customers from Apple Inc. (AAPL) to Lenovo Group Ltd. (LNVGF, LNVGY) hastened shipments of consumer products to the US over the first quarter of the year to preempt tariffs. Samsung’s own Galaxy S25 flagship smartphone series also buoyed earnings. That helped boost net income to 8.03 trillion won, above estimates.

But such one-time pre-tariff gains have done little to assuage concern about long-term demand. Analysts including Canalys see the first-quarter surge in shipments as an acceleration of deliveries from later in the year — and any intensification in US-China tensions could put more pressure on global trade.

Samsung has struggled for months to secure Nvidia Corp.’s final nod for its most advanced HBM products, which are today the most lucrative segment for memory makers. Icheon-based SK Hynix Inc. (000660.KS) retains the top position in providing these chips enabling AI accelerators.

That catch-up effort continues to eat away at Samsung’s earnings. It spent 9 trillion won in research and development in its fiscal first quarter, up 16% from a year ago.

Samsung said it has shipped its enhanced HBM3E samples to major customers and expects that product line to contribute to revenue starting in the second quarter. The company also forecast HBM sales to bottom out in the first quarter and gradually recover, helped by its improved HBM3E. For the next-generation HBM4, it maintained its target to begin mass production in the second half of the year, and said it’s in talks with multiple clients for HBM4.

Within Samsung’s semiconductor division, the contract chipmaking business has struggled, weighed down by a lack of significant orders from major clients. This has made it harder to compete with Taiwan Semiconductor Manufacturing Co., which held a dominant share of almost two thirds of the global foundry market in the third quarter of 2024, according to Taipei-based TrendForce. Samsung’s share stood at 9.3%.

The foundry business posted a loss due to lower utilization rates and high fixed costs. However, the company expects a gradual recovery in demand, which should improve utilization and help narrow losses in the second half.

Samsung’s foundry arm now aims to begin mass production using 2-nanometer processes in the June quarter, a key step in its bid to catch up to TSMC and capture some of the high-end logic chipmaking business.

—With assistance from Vlad Savov.

(Updates with quotes from executives from third paragraph)