Samsung Electronics on Tuesday estimated its second-quarter operating profit plunged 55.9 percent from a year earlier due to sluggish chip business and the fallout from US trade policies, missing market expectations.
The world's biggest maker of memory chips expected an operating profit of 4.59 trillion won ($3.4 billion) for the quarter ending in June, sharply down from 10.44 trillion won a year earlier, according to an earnings guidance released by Samsung Electronics.
From the previous quarter, operating profit sank 31.2 percent from 6.69 trillion won.
The operating profit was 23.4 percent lower than the average estimate, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.
Revenue edged down 0.1 percent to 74 trillion won. The data for net earnings was not available.
In a separate release, Samsung Electronics attributed the sharp on-quarter decline in profit to inventory replenishments and the impact of the U.S. ban on exports of advanced AI chips to China.
For the upcoming quarter, Samsung Electronics expects a rebound in demand and sales of premium high bandwidth memory (HBM) chips, despite reports that its HBM products failed to pass quality tests by U.S. artificial intelligence (AI) chip leader Nvidia Corp.
"The memory business saw a decline in performance due to one-off costs, such as provisions for inventory asset valuation," the company said in a statement. "However, improved HBM products are currently being evaluated and shipped to customers."
It also noted that its non-memory division, including its foundry segment, is expected to reduce losses in the third quarter, backed by better utilisation rates amid a gradual recovery in demand.
Although Samsung did not disclose detailed earnings by business division, market analysts estimated that its semiconductor unit posted an operating profit of around 1 trillion won in the first quarter.
Experts pointed to sluggish sales of HBM products, a decline in NAND flash prices and a stronger Korean won as key factors behind Samsung Electronics' worse-than-expected performance in the second quarter.
The launch of the flagship Galaxy S series smartphone in January, which contributed to a 10 percent year-on-year sales increase in the first quarter, had little impact on the company's second-quarter results.
Its conventional television and home appliance businesses are also expected to have seen a drop in profitability during the period on U.S. tariff impacts.
Despite the weak showing, analysts forecast a rebound in the third quarter, backed by a recovery in memory chip prices.
"Samsung Electronics' operating profit appears to have bottomed out in the second quarter and is expected to show gradual improvement," said Roh Geun-chang, chief researcher at Hyundai Motor Securities Co., citing anticipated gains in HBM sales.
The company will release its final earnings report later in the month.
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