Samsung, profits halved in June (-56%) as chip crisis deepens

Samsung's profits fell for the first time since 2023, reflecting growing market share losses that cloud the memory chip manufacturer's prospects in the age of artificial intelligence.

The company reported a 56% slump in operating profit for the June quarter, sharper than expected, attributed to stock write-downs following US restrictions on artificial intelligence chips destined for China. On Tuesday, its shares swung between gains and losses in Seoul after the company announced a 3.9 trillion won share buyback.

The disappointing results underline how the largest South Korean company has ceded leadership in the artificial intelligence market to SK Hynix in the post-ChatGPT infrastructure boom. Its long-standing rival, together with Micron Technology, now sells more of its state-of-the-art high-bandwidth memory chips, coupled with Nvidia's AI accelerators. To complicate matters further, US restrictions on technology exports to China are hampering the turnaround in its loss-making contract chip business.

However, some investors predict that the company, which produces chips for smartphones, has bottomed out over the summer. Nvidia is moving towards a new generation of memory chips, offering Samsung an opportunity. The one-off stock adjustment suggests the company wants to start the second half of the year with a clean slate, said Sanjeev Rana, head of research at CLSA Securities Korea.