Samsung Q1 Profit Set to Drop 21% Amid AI Chip Slump

Samsung Electronics has announced that its Q1 profits for 2025 are expected to fall by 21%, primarily due to weak sales of AI chips and continuing losses in its wafer foundry business. The company is set to release its preliminary Q1 earnings report on April 8, amid ongoing leadership changes following the sudden passing of co-CEO Han Jong-hee in March.

Since mid-2024, Samsung has struggled with declining chip profits, particularly as it lags behind key competitor SK Hynix in supplying high-performance memory (HBM) chips for AI chip leaders such as Nvidia. Samsung's challenges in the high-end market have resulted in increased reliance on Chinese customers seeking lower-end products not affected by U.S. export restrictions.

Analyst Ryu Young-ho from NH Investment & Securities noted that due to anticipated additional sales restrictions from the U.S., Chinese clients placed early orders in the previous quarter, causing a dip in AI chip demand for Q1. As a result, Samsung's share of HBM chips in its overall DRAM shipments is expected to slightly decrease, leading to lower profitability from DRAM sales.

According to LSEG SmartEstimate, Samsung's Q1 operating profit is forecasted to be 5.2 trillion Korean won ($3.62 billion), compared to 6.6 trillion won during the same period in 2024. The company's semiconductor division is expected to report an operating profit of 1.7 trillion won, down from 1.9 trillion won in 2024. Meanwhile, Samsung's mobile and network businesses are expected to see an increase in profit, rising from 3.5 trillion won to 3.7 trillion won, driven by higher smartphone shipments and increased foreign exchange gains due to the depreciation of local currencies.

Despite ongoing efforts to redesign its advanced HBM chips for key customers, analysts suggest that Samsung's reliance on commodity chips makes its profitability more vulnerable to price fluctuations. TrendForce data shows that DRAM chips, widely used in smartphones and PCs, saw a price drop of about 25% year-on-year in Q1, while NAND flash memory chips used in data storage saw a sharp decline of 50% during the same period.

As a result, analysts predict that Samsung will continue to underperform compared to SK Hynix, with LSEG data indicating that SK Hynix's profits are expected to more than double compared to last year, driven by strong AI chip demand.