Samsung's earnings decline as it experiences challenges in keeping pace with competitors in the AI chip sector
Samsung Struggles in Global Semiconductor Race
Samsung Electronics, once a leading force in the global semiconductor race, is facing challenges that have caused a significant drop in its market position. A disappointing earnings report released on Thursday has reignited concerns about the future of the embattled South Korean tech giant.
The company's second-quarter operating profit plummeted 55% to 4.7 trillion won ($3.4 billion), a stark contrast to the same period last year. Samsung warned investors of its dismal performance in its earnings projection earlier this month.
The struggles can be attributed to a perfect storm of factors. Geopolitical headwinds, execution issues in advanced chip manufacturing, and competitive setbacks in key product segments like high bandwidth memory (HBM) and logic chips have all contributed to Samsung's current predicament.
U.S. export restrictions on advanced AI chips to China have severely impacted Samsung’s foundry business, causing profit declines and inventory issues. Additionally, proposed U.S. tariffs on non-American semiconductors pose ongoing supply chain risks.
Samsung lagged behind rivals SK Hynix and Micron in the high bandwidth memory (HBM) space. Notably, delays in obtaining HBM3E certification from Nvidia — a dominant AI chip customer — created a bottleneck that allowed competitors to capture about 75% of the HBM3E market. Samsung began supplying HBM3E to AMD in mid-2025 but has not yet secured Nvidia, creating a significant revenue gap.
Samsung’s aggressive push to be the first with Gate-All-Around (GAA) transistor technology at the 3nm node backfired due to low manufacturing yields and poor power efficiency with their initial 3nm process. This technical setback caused major customers like Google and Qualcomm to shift future chip production to TSMC’s more mature 3nm FinFET process. Consequently, Samsung’s foundry market share dropped sharply from over 12% to about 7.7% within a year.
Despite these setbacks, Samsung is not resting on its laurels. The company is proactively meeting the growing demand for high value-added and AI-driven products and continuing to strengthen its competitiveness in advanced semiconductors.
A significant boost to Samsung's struggling profitability came with a $16.5 billion deal with Tesla to produce its new chips for self-driving cars and humanoid robots. The agreement will help increase utilization of Samsung's Texas facilities, improving the company's return on investment.
Elon Musk announced that Samsung will manufacture Tesla's next-generation AI6 chip, with Tesla allowing Samsung to maximize manufacturing efficiency. Mass production for the Tesla project won't begin until 2027, but the deal is a boost to market sentiment and represents "a big word of confidence."
Samsung has secured a deal with Tesla to produce its new chips, a move that could boost the company's standing in the global semiconductor race. The company has also done a lot of restructuring for this business in the last 12-15 months, indicating efforts to resolve issues and expect improvements from the second half of the year.
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- Samsung's business with Tesla for producing new chips, particularly AI6 chips, demonstrates a strategic move to bolster its position in the technology sector, specifically in the global race for advanced semiconductors and AI-driven products.
- In an attempt to overcome challenges in the global semiconductor race, Samsung has been actively investing in finance and technology, restructuring its business in the last 12-15 months and diversifying its product offerings to include high value-added items like self-driving car chips and humanoid robot chips.
