Samsung Electronics reported a 'performance shock' in the second quarter of this year (April to June), with operating profit decreasing by about 55% compared to the same period last year. The significant decline is attributed to the poor performance of the high-bandwidth memory (HBM) business, which is experiencing a surge in demand as a core component for artificial intelligence (AI) semiconductors, and to the foundry division, which recorded large losses of over 2 trillion won due to difficulties in securing orders from customers.
Samsung Electronics announced on the 31st that its consolidated revenue for the second quarter of this year was 74.5663 trillion won, with operating profit of 4.6761 trillion won. Compared to the same period last year, revenue increased by 0.6%, while operating profit decreased by 55.23%. Securities analysts had sharply lowered their expectations for Samsung Electronics' second quarter operating profit by nearly 2 trillion won over the past month, but the company recorded results that fell short of expectations.
Samsung Electronics noted, "Despite revenue growth, operating profit decreased by 800 billion won compared to the previous quarter due to the provision for inventory asset valuation in the memory business and the provision for inventory resulting from sanctions in the non-memory business," and explained that revenue decreased by 16% and operating profit also fell by 1.4 trillion won compared to the previous quarter due to reduced effects from the launch of new smartphone models and intensified competition in the TV market.
◇ Poor HBM performance and foundry losses, semiconductor division's operating profit of 400 billion won, down 94% year-on-year
The Device Solutions (DS) division, which handles semiconductor operations, recorded revenue of 27.9 trillion won and operating profit of 400 billion won. This operating profit was the lowest since a loss of over 2 trillion won in the fourth quarter of 2023. Samsung Electronics explained that it actively responded to server demand by expanding the sales proportion of HBM3E (5th generation HBM) and high-capacity DDR5 products, and that sales of SSDs for data centers also increased. However, they stated that operational costs, including provisions for inventory asset valuations, led to a decline in results.
The System LSI division achieved solid revenue by supplying system-on-chip (SoC) products applying gate-all-around (GAA) processes to key flagship models, but profitability improvement was limited due to rising development costs for advanced products. Although the foundry division saw significant revenue improvements compared to the previous quarter, provisions for inventory were incurred due to the impact of sanctions on advanced AI chips. Additionally, continued declines in utilization rates for the mature process lines resulted in poor performance.
The Mobile Experience (MX) and Network divisions recorded revenue of 29.2 trillion won and an operating profit of 3.1 trillion won. Despite a decrease in sales volume compared to the first quarter when new models were launched, both revenue and operating profit grew year-on-year due to robust sales of flagship smartphones. The Network division improved profitability compared to the previous quarter and the same period last year due to increased revenue from overseas markets and resource efficiency.
The Visual Display (VD) division increased its sales proportion of strategic products such as Neo QLED and organic light-emitting diode (OLED) TVs, as well as large-size TVs, but saw performance decline due to intensified global competition. Home appliances improved profitability thanks to strong air conditioner sales entering the peak season and an increase in sales of high-value-added AI home appliance products.
Harman improved profitability through strong audio sales and cost efficiencies in its automotive business. Display sales improved from the previous quarter due to increased demand for new smartphone products and the expansion of sales for small and medium-sized panels supplied to the IT and automotive sectors. High-performance QD-OLED monitor displays saw increased sales, focusing primarily on the gaming market.
◇ Proactive response to HBM, full-scale introduction of 2-nanometer foundry… aiming for a rebound in the second half
Samsung Electronics expressed concerns about the global economic slowdown amid uncertainties in the global trade environment and geopolitical risks, but forecasted that growth would spread centered around the AI and robotics industries, leading to gradual improvements in the IT market.
The memory division plans to actively respond to robust demand for AI server products with DRAM, including HBM, high-capacity DDR5, LPDDR5x, and 2GDDR7. For NAND, it plans to accelerate the transition to 8th generation V-NAND and expand sales of high-capacity, high-performance SSDs in response to server demand.
The System LSI division plans to strengthen the competitiveness of Exynos, targeting the introduction of next year's flagship lineup, while expanding sales of new products featuring ultra-high resolution, low-light image improvement technology called Nano Prism in image sensors. The foundry division aims to ramp up production of mobile new products utilizing GAA 2-nanometer processes and improve utilization and profitability through expanded sales to major customers.
The MX division plans to continue sales focused on flagship products such as the Galaxy Z Fold 7 and Z Flip 7, as well as the Galaxy S25 series, while pursuing the expansion of smartphone market share through the launch of new AI-enhanced A-series products.
The VD division plans to push for revenue growth by early response to seasonal demand with its AI TV lineup. Additionally, the home appliance division plans to optimize the supply side to minimize tariff impacts while improving its business structure, focusing on high-value products such as heating and cooling systems alongside expanding the sales of AI home appliances.