samsung's chip division sees profits crater 94% amid us-china tech war

2025-07-31 general

seoul, Thursday, 31 July 2025.
samsung electronics is feeling the pinch from us export controls aimed at china. second-quarter profits for samsung’s chip business plummeted 94%. this sharp decline is attributed to restrictions on selling advanced ai chips to china, a critical market. despite this setback, samsung’s smartphone division offered a partial buffer, thanks to robust galaxy sales. samsung is struggling to compete with tsmc, even after tesla announced a $16.5 billion deal with samsung this week.

financials take a hit

samsung’s second-quarter operating profit experienced a significant downturn, plummeting 55% to 4.7 trillion won ($3.4 billion). this is a stark contrast to the 10.4 trillion won ($7.5 billion) reported a year prior [1]. the chip division’s operating profit suffered the most, shrinking by nearly 94% from april to june compared to the previous year [1][2]. this decline underscores the immediate financial strain resulting from the export restrictions and samsung’s challenges in the ai chip market [2].

samsung’s struggles extend beyond profit margins to market share. tsmc dominates the logic semiconductor business with a 68% market share, while samsung holds only 8% [1]. sk hynix surpassed samsung in the global dram market in the first quarter of 2025, further intensifying competition [1]. sanjeev rana, head of korea research at clsa, pointed to management’s failure to anticipate the surge in ai demand as a key factor in samsung’s current difficulties [1]. rana stated that samsung was slow to recognize the coming ai revolution [1].

tesla deal offers a glimmer of hope

the recent $16.5 billion deal with tesla provides a potential boost for samsung [1]. tesla’s ceo, elon musk, stated that samsung’s new texas facility will be dedicated to producing tesla’s next-generation ai6 chip [1]. following the announcement, samsung’s shares surged more than 6.9% [1]. rana noted the deal represents a big word of confidence and a boost to market sentiment [1]. however, mass production for the tesla project is not expected to begin until 2027 [1].

us export controls and china

the us export controls on advanced ai chips to china are significantly impacting samsung’s performance [1][2]. these restrictions limit samsung’s ability to sell its high-end chips to chinese customers, a crucial market for semiconductor companies [2]. the us government has also been actively enforcing export regulations, as seen with cadence design systems. cadence design systems paid over $140 million in fines for exporting semiconductor design tools to a chinese military university [3]. this shows the us government is serious about enforcing export controls.

expert opinions and analysis

analysts suggest samsung’s missteps in anticipating ai demand contributed significantly to its current challenges [1]. clsa estimates samsung’s contract chipmaking business posted a substantial operating loss of 5.6 trillion won ($4.1 billion) last year. this loss is projected to increase to 6.6 trillion won ($4.8 billion) this year [1]. despite the tesla deal, experts believe tsmc will continue to be a primary partner for ai chip manufacturing [8]. the us-china trade situation remains fluid, with potential for a 90-day extension of the trade truce [8].

Bronnen

chip exports samsung profits