Samsung's smartphone triumph shone brightly despite a 55% decline in Q2 earnings
Samsung Struggles with Semiconductor Profit Decline in Q2 2025, but Plans for Recovery
Samsung has announced its Q2 2025 results, revealing a challenging quarter for the semiconductor division. The company's semiconductor profits declined sharply by about 90-94% year-over-year, primarily due to delayed shipments of high-bandwidth memory (HBM) chips, U.S. export restrictions on advanced chip sales to China, and valuation losses on unsold memory inventory.
Despite slight revenue growth, the chip division's profitability was severely affected by these factors and one-off costs linked to export curbs. In Q2, semiconductor profit fell from around 6.5 trillion won ($4.6 billion) a year ago to about 400 billion won ($287 million), marking the lowest in six quarters.
However, Samsung is optimistic about a stronger second half due to increased AI needs from tech giants like Meta and Microsoft. To recover, the company plans to leverage expected stronger demand in the second half of 2025, especially from AI-related sectors.
Samsung is focusing on ramping up production and sales of next-generation chips like HBM3E (high-bandwidth memory) and advanced 2nm process nodes. It has also secured major deals, such as a $16.5 billion contract from Tesla, to be manufactured at its Texas plant starting in 2026. The company aims to capitalize on increased server and AI chip demand from clients such as Meta and Microsoft to regain momentum in the second half.
While the semiconductor division struggled, Samsung's smartphone and mobile business performed strongly, contributing significantly to overall profitability. The boost in Samsung's mobile division's profit came from strong sales across its lineup, including phones, laptops, smartwatches, tablets, and smart rings.
Factors Behind Q2 2025 Semiconductor Profit Decline
| Factors Behind Q2 2025 Semiconductor Profit Decline | Samsung’s Recovery Plans | |--------------------------------------------------------------|------------------------------------------------------| | - Delays in shipping HBM chips (notably to Nvidia) | - Focus on HBM3E and advanced 2nm chip production | | - U.S. export restrictions limiting chip sales to China | - Leverage AI-driven server chip demand (Meta, MS) | | - Valuation losses on unsold memory inventory | - Secure and fulfill large contracts (e.g., Tesla) | | - One-off costs related to export curbs | - Strengthen semiconductor competitiveness | | - Profit plunge from 6.5 trillion to 400 billion won (YoY) | - Rely on growing smartphone business to support |
In addition to the new trade agreement between the U.S. and South Korea, which introduces a 15% chip tariff, bringing some relief and predictability, Samsung is developing HBM-3E and HBM-4 memory to stay relevant in the AI chip race.
Samsung's overall revenue for Q2 2025 was approximately $53.5 billion, with the mobile division pulling in around $2.23 billion in profit, a nearly 40% jump from last year's $1.6 billion. Daniel Araujo, VP of Samsung's Mobile Experience team, announced that the Galaxy S25 FE is arriving earlier than planned, expected in August or early September.
With these recovery plans in place, Samsung is hopeful for a stronger second half of 2025 and a return to profitability in its semiconductor division.
Samsung's recovery plans involve capitalizing on increased demand in the second half of 2025, particularly from AI-related sectors, such as Meta and Microsoft. To do this, the company plans to ramp up production and sales of next-generation chips like HBM3E and advanced 2nm process nodes.
In addition to this, Samsung aims to leverage its smartphone and mobile business, which performed strongly, contributing significantly to overall profitability, to support its semiconductor division's recovery. For instance, the anticipated early release of the Galaxy S25 FE could boost Samsung's mobile division further.
