Samsung Electronics’ operating profit in the second quarter of this year was nearly cut in half amid sustained challenges in its semiconductor segment and a significant inventory write-down.

On July 8, Samsung Electronics announced in a regulatory filing that it posted a consolidated operating profit of KRW 4.6 trillion for Q2 2025, representing a 55.94% decrease compared to the same period the previous year. Revenue amounted to KRW 74 trillion, a slight 0.09% drop from the previous year.

The company attributed this steep decline primarily to the poor performance of its Device Solution (DS) division, which includes its crucial semiconductor operations. Key factors included a weakened competitive position in the high-bandwidth memory (HBM) market, as well as reduced utilization rates in its foundry business.

In its explanatory materials, Samsung Electronics stated, “The DS segment experienced a decrease in profits compared to the previous quarter due to factors such as inventory write-downs and the impact of U.S. sanctions on advanced AI chips.”

The company recorded approximately KRW 1 trillion in inventory valuation losses this quarter. Inventory write-downs refer to accounting for anticipated losses when product values fall and are no longer expected to be sold at original market prices.

Uncharacteristically, Samsung Electronics explained, “The memory division saw a decline in performance owing to one-time expenses like inventory valuation losses.”

The DS division’s struggles were further compounded by diminished competitiveness in the HBM sector. Samsung Electronics has been unable to supply HBM products to Nvidia for over a year and is currently performing quality tests on its improved 12-layer HBM3E products.

Meanwhile, the NAND flash division—which last year posted operating profits in the KRW 1 trillion range—has come under pressure amid declining downstream demand, falling prices, and the impact of new U.S. tariff policies, making deteriorating results unavoidable this year.

Additionally, foundry and System LSI operations within the DS division continued to post losses this quarter, further weighing on overall results.

Despite these challenges, industry analysts and securities experts predict Samsung Electronics will hit its low point in Q2 and begin to recover in the second half of the year.

Forecasts indicate that DS division operating profit could rebound to between KRW 3 trillion and KRW 5 trillion in both the third and fourth quarters. Shipments of HBM to major clients are expected to increase, while foundry and System LSI may benefit from a seasonal demand uptick as well as increased shipments of the in-house application processor, Exynos 2500, narrowing losses.

Samsung Electronics is accelerating efforts to re-enter Nvidia’s supply chain in the second half and plans to expedite mass production of next-generation HBM4 products. In the NAND segment, the company will maintain tight supply control and focus on high value-added products, such as enterprise SSDs.

Looking ahead, the foundry business will intensify its focus on advanced 2-nanometer processes set to begin at year’s end, while also strengthening legacy processes at 28 nanometers and above.

Yangpaeng Kim, a senior researcher at the Korea Institute for Industrial Economics & Trade, commented, “Samsung Electronics’ performance slowdown stems from a complex interplay of China export regulations and the impact of inventory write-downs due to weakened HBM competitiveness. In the second half, reducing inventory risks and acquiring diverse customers should enable performance to improve.”

Samsung Electronics is scheduled to officially announce detailed results for each business segment on July 31.

Note “This article was translated from the original Korean version using AI assistance, and subsequently edited by a native-speaking journalist.”

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