Samsung Cuts Q2 Forecast Amid Trade Worries

SEOUL (Romero.my.id) – Samsung Electronics announced on Wednesday that it was withdrawing its business forecast for the present quarter and cautioned that U.S. tariff policies might reduce demand for essential items like smartphones.

The tech behemoth stated they anticipated increased uncertainties for their chip division over the course of the year, with their mobile phone deliveries experiencing a decline in the next three months.

The biggest producer of memory chips worldwide saw a slight increase in their first-quarter operating profit. This occurred because concerns over U.S. tariffs led clients to rush buying smartphones and general-purpose chips, which helped offset the effects from their less effective artificial intelligence chip division.

Samsung announced an operating profit of 6.7 trillion won ($4.68 billion) for the quarter ending in March, marking a rise of 1.2% compared to the same period last year and aligning with their preliminary forecast.

Last year, among the major technology stocks, Samsung had one of the poorest performances. Recently, its share price dropped by 0.4%, consistent with the overall market movement.

Rising U.S. duties on Chinese products and stricter limitations on AI chip exports to China, where Samsung has its primary market, risk reducing demand for certain electronic parts produced by the firm like semiconductors and mobile phone screens.

President Donald Trump’s “reciprocal” tariffs, mostly delayed until July, could potentially affect numerous nations such as Vietnam and South Korea, where Samsung manufactures smartphones and display panels.

Samsung stated that they were contemplating moving the manufacturing of TVs and home appliances due to the tariffs.

Chip demand is expected to remain solid in the second quarter, driven by AI servers and preemptive purchasing activities after the pause in tariffs, it added.

However, it cautioned that certain customers preshipping chips could potentially lead to decreased demand further down the line.

"We think that the uncertainty regarding demand is increasing in the latter part of this year due to recent alterations in tariff policies across key nations and the tightening of export restrictions on AI chips," stated Vice President Kim Jae-june from Samsung’s memory division during an earnings call.

AI CHIPS

Samsung's mobile division along with its network business saw a 23% increase in profits, totaling 4.3 trillion won for the period, marking their highest earnings in four years. This surge was bolstered by the recent release of the top-tier Galaxy S model equipped with artificial intelligence functionalities.

Samsung has ramped up smartphone manufacturing in Vietnam, India, and South Korea before the U.S. tariffs come into effect, according to an individual with knowledge of the situation who spoke to Romero.my.idearlier.

Although the mobile sector showed strong performance, the chip division saw its operating profit drop by 42%, decreasing to 1.1 trillion won compared to the previous year, even with some clients building up their chip inventories.

Samsung experienced a decline in HBM sales, which is utilized in AI processors, partly because of U.S. export restrictions on AI chips.

Samsung mentioned that it has delivered samples of its improved HBM3E products to key clients and anticipates HBM sales, which hit their lowest point in Q1, to start increasing gradually from the second quarter onwards, though it did not provide specific forecasts.

Experts believe that approximately one-third of Samsung's High Bandwidth Memory (HBM) earnings have originated from sales within China. However, when it comes to providing these memory chips to Nvidia in the U.S., Samsung trails behind its local competitor SK Hynix.

Last week, SK Hynix reported their second-largest quarterly operating profit for the initial three months, surging by 158% to reach 7.4 trillion won, largely due to robust demand from artificial intelligence technologies.

The revenue increased by 10% to reach 79.1 trillion won during the January-to-March quarter, which aligns with their previous projection of 79 trillion won.

($1 = 1,431.5000 won)

(Reported by Hyunjoo Jin, Joyce Lee, and Heekyong Yang; Edited by Stephen Coates)