Samsung Electronics reported a rough second quarter, with its operating profit falling far short of expectations. The main culprit was a massive 93.8% plunge in profits from its critical chip business. While the company’s overall revenue was stable, the profit crash shows the intense pressure on its most important division.
The South Korean tech giant said the drop was due to “inventory value adjustments” and one-time costs related to China export restrictions. The bad news sent Samsung’s shares falling in early trading.
But it wasn’t all bad news. The company’s chip-making foundry business received a major boost from a new $16.5 billion contract. Tesla CEO Elon Musk confirmed his company is the mystery customer, a huge win for Samsung as it looks to attract more big-name clients for its custom chip manufacturing.
However, the other side of Samsung’s chip business is struggling. The company has fallen behind its rival SK Hynix in producing the high-demand memory chips used for artificial intelligence. This is a major threat to Samsung’s traditional leadership in the memory market.
Fortunately, Samsung’s smartphone business is picking up the slack. The mobile division saw its sales and profits grow, thanks to strong sales of its Galaxy S25 and A series phones. The company successfully defended its spot as the world’s top smartphone seller, providing a much-needed bright spot in an otherwise tough quarter.
