South Korean tech giant Samsung Electronics Co. saw its operating profit fall by nearly 56 percent in the second quarter of 2025 as its semiconductor business continued to struggle.

Samsung Electronics said in a preliminary earnings report on Tuesday that its consolidated operating profit for the second quarter totaled 4.6 trillion won ($3.36 billion), down 55.94 percent from the same period a year ago. The figure also marked a 31.24 percent decline from the previous quarter and fell 23.4 percent short of the market forecast of 6.01 trillion won compiled by Yonhap Infomax, amounting to an “earnings shock.”

It is the first time in six quarters that the company’s quarterly operating profit has fallen below 5 trillion won since the fourth quarter of 2023, when it was 2.82 trillion won. On a second-quarter basis, it is the lowest figure in two years since the second quarter of 2023 (668.5 billion won).

Revenue came in at 74 trillion won in the April to June period, down 0.09 percent year-on-year and 6.49 percent quarter-on-quarter.

The sharp drop in operating profit was primarily due to the Device Solutions (DS) division, which includes the semiconductor business. The division reflected inventory valuation losses in anticipation of a decline in the value of its inventory assets, and these inventory write-downs are estimated to amount to several hundred billion won, covering both memory and non-memory sectors.

Samsung Electronics stated that its DS division’s profits declined quarter-on-quarter due to inventory write-downs and the impact of U.S. export restrictions on advanced AI chips.

It also noted that while memory earnings declined due to one-off costs such as inventory write-downs, its improved high-bandwidth memory (HBM) products are currently undergoing evaluation and being shipped to customers.

Regarding non-memory semiconductors, Samsung said, “Sales were limited due to U.S. sanctions against China on advanced AI chips, resulting in additional inventory reserves, while continued low fab usage also weighed on performance. However, we expect losses to narrow in the second half as utilization rates improve with recovering demand.”

In addition to the continued slump in the semiconductor business, performance across all business divisions appears to have been weaker than expected, impacted by a stronger Korean won against the dollar and rising tariffs.

The non-memory sector, including foundry and System LSI (design), continued to post losses, and NAND flash memory also remained in the red while high-value HBM products have yet to contribute significantly to profits.

“HBM performance in the second quarter fell short of expectations, and NAND prices declined compared to the previous quarter, likely resulting in a slight increase in losses,” Korea Investment & Securities Co. analyst Chae Min-sook said. “We expect foundry losses to remain at a similar level to the first quarter, and the sharp decline in the won/dollar exchange rate since June will also have a negative impact on revenue and operating profits.”

Samsung’s Mobile eXperience (MX) division, which led company-wide performance in the first quarter, also entered a seasonal downturn after the early-year impact of the Galaxy S25 launch faded. The TV and home appliance divisions likely saw profitability decline due to prolonged weak demand, increased tariffs, and intensified market competition.

While Samsung Electronics did not release division-specific results in this preliminary report, market analysts estimate the second-quarter operating profit from the DS division to be in the 1 trillion won range.

Other projected division profits include: MX and Network at around 2 trillion won, Display at 600 to 700 billion won, TV and Home Appliances at 400 to 500 billion won, and Harman at 300 to 400 billion won.

Despite the weak second-quarter results, analysts expect Samsung Electronics’ performance to improve in the second half, led mainly by the memory sector. This is because rising memory prices are boosting industry sentiment, and both mobile and display businesses are entering peak season after serving as a buffer during the semiconductor downturn.

“Prices are rising as the supply-demand balance in the DRAM market stabilizes, which will clearly improve performance through increased shipments, likely driving Samsung’s overall earnings recovery,” Hana Securities Co. analyst Kim Rok-ho said.

Hyundai Motor Securities Co. head of research Noh Geun-chang echoed this outlook, saying, “The second quarter is likely the bottom for Samsung’s operating profit in 2025, and we expect a gradual improvement. The share of HBM within DRAM will rise as Advanced Micro Devices Inc. (AMD) adopts Samsung’s HBM3E 12-layer products, and foundry losses will start to narrow from the third quarter due to new clients and improved cost efficiency.”

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