Chip division posts third straight decline as tech giant braces for potential US tariffs
Samsung Electronics on Wednesday reported stronger-than-expected earnings for the first quarter, buoyed by robust sales of its AI-enhanced Galaxy S25 smartphones, even as its key chip division continues to tumble.
For the January-March period, the tech giant posted an operating profit of 6.69 trillion won ($4.7 billion), up 1.2 percent from a year earlier. The figure exceeded analysts' expectations, which had hovered in the 5 trillion won range.
Revenue for the quarter came to 79.14 trillion won, up 10.05 percent on-year, marking an all-time quarterly high. Net profit climbed 21.7 percent to 8.22 trillion won from the same period last year.
The upbeat results came despite persistent woes in the critical semiconductor segment. The company’s chip division, the Device Solutions unit, posted an operating profit of 1.1 trillion won, down 42 percent on-year, and marked the third consecutive quarter of declining performance. That is much lower than the 7 trillion won profit its smaller chip-making rival SK hynix posted during the same period.
Revenue of Samsung's chip division came to 25.1 trillion won, up 9 percent on-year but down 17 percent from the previous quarter.
While demand for DRAM and NAND sales improved during the period as customers anticipated a price rebound, the overall gains were dampened by weak high-bandwidth memory chips sales, which were impacted by US export controls on AI chips.
In a conference call, Kim Jae-june, executive vice president in the memory division, told investors that the company is expected to see its sales rebound as it expands the supply of enhanced 12-layer HBM3E AI chips to clients.
“We have completed supplying samples of the improved HBM3E products to our major clients, and we expect to see more companies purchase from the second quarter,” Kim said. “Sales of HBM have hit bottom in the first quarter, but are expected to recover gradually, quarter by quarter.”
Samsung is still waiting to gain Nvidia’s green light for its HBM chips -– a critical component for the GPUs that power generative AI systems like ChatGPT. Samsung’s failure to secure an earlier edge against its smaller crosstown rival SK hynix has continued to weigh on its earnings and wiped out billions of dollars of market value last year.
Samsung's struggling contract chip manufacturing, or foundry unit, underperformed due to weak seasonal demand, especially in mobile phones, and client inventory adjustment and stagnant fab utilization, the company explained.
Meanwhile, the company’s Device Experience division, responsible for smartphones, mobile devices, TVs and other consumer electronics, saw its sales climb 9 percent on-year to 51.7 trillion won and an operating profit of 4.7 trillion won.
Leading the sales was the mobile business, which alone posted 37 trillion won in sales and 4.3 trillion won in operating profit. The Galaxy S25 series, which was launched in February, has set a new domestic record by surpassing 1 million units sold in the shortest time for any Galaxy model in South Korea.
Looking ahead, company executives expressed caution as the US tariffs could pose uncertainty for its chip businesses and smartphone components.
“We are closely monitoring trade policies in key markets and maintaining close communication to minimize negative impact,” Park Soon-cheol, Samsung’s chief financial officer, told investors during a conference call. “We will make the most of our global production base and customer management capabilities to respond swiftly as needed.”
Park acknowledged the challenges of scenario planning amid rapidly changing tariff policies and geopolitical tensions.
To minimize exposure, Park said Samsung will consider relocating production of certain home appliance volumes, while expanding premium product lines. He also added that if tariffs are imposed on semiconductors, the mobile division will offset potential price hikes by expanding its flagship and new Edge model sales.
“As for the DS division, we will closely monitor the direction of the US semiconductor tariff policy and continue to review response plans based on various scenarios,” he said.
sahn@heraldcorp.com
