samsung's chip division hit hard: profits plummet amid export restrictions
Seoul, Thursday, 1 May 2025.
samsung electronics’ chip business saw profits drop by roughly 40%. this decline occurred even with rising demand. the fall is attributed to u.s. export controls impacting sales of high-end chips. the march-quarter operating profit for samsung’s chip segment fell sharply to ₩1.1 trillion (us$770 million). this was driven by a decrease in average selling prices. nvidia’s demand is key to a dramatic rebound in samsung’s chip business. without it, recovery will be difficult.
stock performance and market reaction
The news of the profit decline impacted Samsung’s stock [1]. On Wednesday morning, Samsung Electronics’ shares in Seoul experienced a decrease of approximately 0.5% [2]. Investors are reacting to the lower-than-expected performance of the chip division [GPT]. This division is crucial for Samsung’s overall financial health [GPT]. The stock’s movement reflects concerns about the company’s ability to maintain its competitive edge in the memory chip market, especially in the lucrative AI sector [1].
impact of export controls and hbm demand
U.S. export controls are significantly affecting Samsung’s operations in China [4]. These restrictions limit the sales of advanced chips, impacting revenue from a key market [1][4]. Samsung acknowledged that these controls are creating uncertainty for future demand [4]. Clients are also delaying orders, awaiting the enhanced HBM3E products [1]. Greg Noh, an analyst at Hyundai Motor Securities, noted that securing demand from Nvidia is vital for any substantial recovery in Samsung’s chip business [1].
strategic response and future outlook
Samsung is planning to increase production of its enhanced 12-layer HBM3E product in the second quarter [1]. This move aims to meet the demands of some clients [1]. The company is also focusing on high-value-added businesses centered on high-density servers [4]. Samsung intends to accelerate the transition to its 8th-generation V-NAND technology to bolster product competitiveness [4]. Despite current challenges, Samsung’s CFO, Park Soon-chul, anticipates a gradual improvement in overall performance in the second half of the year, assuming the uncertainties subside [4].
financial performance and sector comparison
Samsung’s overall Q1 revenue reached ₩79.1 trillion, a 10% increase year-over-year [5]. Operating profit saw a slight increase of 1.2% to ₩6.7 trillion [4]. While the chip division struggled, the Device eXperience (DX) division, which includes smartphones, performed well [5]. This division’s operating profit more than doubled, reaching ₩4.7 trillion [4]. Samsung is striving to catch up with competitors like SK Hynix in the AI memory chip market [1]. Increased R&D spending, up 16% to ₩9 trillion, highlights this commitment [2].