Second Quarter Earnings Halved Year-on-Year
Large-Scale Inventory Adjustments for a Second-Half Rebound
Major Foundry Order Raises Future Revenue Expectations
HBM and Exynos Set as Key Goals for the Second Half
Samsung Electronics, which recorded an "earnings shock" in the second quarter following the first quarter, posted lower-than-expected results for two consecutive quarters mainly due to the deteriorating business conditions in its DS (Device Solutions, semiconductor) division. However, Samsung is aiming for a rebound starting in the third quarter, as it passes through the seasonal off-peak period and secures a large-scale foundry (semiconductor contract manufacturing) order. Additionally, the company has set three major goals for the second half of the year: supplying high-bandwidth memory (HBM) HBM3E and HBM4, and equipping its devices with the Exynos 2600.
According to Samsung Electronics' disclosure on July 31, its operating profit for the second quarter was KRW 4.7 trillion, a steep 55% decline year-on-year, reflecting weak performance. In particular, the DS division, which handles the semiconductor business, posted an operating profit of KRW 400 billion. This was the lowest since the fourth quarter of 2023, when the division recorded a deficit of over KRW 2 trillion. Although memory sales increased, costs such as inventory valuation losses weighed on the results. Samsung Electronics explained that it has resolved the inventory burden that occurred in the first half, aiming for a rebound in the second half of the year.
Major Tesla Order: 80 Million Chips to Be Supplied Over the Next 8 Years
There is also good news for the foundry business division, which had been suffering from continued poor performance. On July 28, Samsung Electronics secured a contract worth KRW 22.7648 trillion from Tesla, raising expectations for future orders. Although this will not immediately impact sales in the second half of this year, industry experts expect significant revenue growth starting in 2027. It is estimated that Samsung will supply up to 82.5 million Tesla-exclusive artificial intelligence (AI) chips (AI6) over the next eight years, starting from the second half of 2027, from its Taylor plant in Texas, which is scheduled to begin operations next year.
Ryu Hyungkeun, a researcher at Daishin Securities, analyzed, "If the project is successfully completed, additional orders for more chips can be expected. This serves as key evidence that Samsung Foundry's competitiveness is rebounding, and can be likened to a dying ember being reignited."
Regaining Leadership in the AI Memory Market with HBM3E and HBM4
Samsung is also putting everything on the line for HBM supply in the third quarter. Industry sources predict that Samsung will supply HBM3E 12-layer samples to Nvidia by the end of August, and begin mass production in the fourth quarter. Previously, Samsung secured a deal to supply its HBM3E 12-layer products for AMD's next-generation AI accelerator "MI350" series, increasing the likelihood that this will contribute to profits in the second half of the year.
Samsung Electronics is also aiming to obtain Nvidia certification for its sixth-generation HBM4 products in the second half of this year. In particular, the company has succeeded in developing 10nm-class (1nm = one billionth of a meter) sixth-generation (1c) DRAM process technology, with a strategy to surpass SK Hynix and Micron, which are using fifth-generation (1b) processes. As the HBM market expands and price competitiveness is expected to decrease, securing supply contracts ahead of competitors will be critical.
Another Attempt at Equipping Exynos: Will the Foundry Division Grow Together?
Attention is also focused on whether Samsung's own mobile application processor (AP), the Exynos 2600, will be equipped in the upcoming "Galaxy S26" series, scheduled for release next year. If quality testing for the Exynos 2600 is completed by October and technical verification proceeds smoothly, Samsung plans to apply it to mass production for the S26 series. Previously, the Exynos 2500 failed to be adopted for the Galaxy S25, resulting in setbacks. Although the recently released "Galaxy Z Flip7" features the Exynos 2500, the supply volume is different from the flagship Galaxy S series. In particular, if the Exynos 2600 is installed in the S26, the foundry division will be able to take full charge of production.
With increasing demand for AI chips for China equipped with GDDR7 DRAM for graphics, Samsung Electronics is also expected to benefit significantly. Nvidia is purchasing GDDR7 from Samsung Electronics. According to U.S. securities firm Morgan Stanley, sales are expected to reach USD 384 million this year alone.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
