Samsung's earnings take a dip as the company grapples to keep pace in the competitive AI processor market
Samsung, once a leading force in the global semiconductor race, has been facing challenges in recent times. The South Korean tech giant reported a sharp decline in its semiconductor profitability, market share erosion in critical high-bandwidth memory (HBM) segments, and the impact of US export restrictions, among other factors [1][3].
The most recent blow came in the form of a 94% year-over-year drop in operating profit in Q2 2025 for Samsung's semiconductor division, despite stable sales. This decline was mainly due to heavy inventory writedowns and pricing pressure in memory chips [1][3].
In the AI memory chip market, Samsung’s share shrank to 27% in 2025, trailing SK Hynix (57%) [2]. The failure to secure early certification for its 12-layer HBM3E chips from major customers like NVIDIA delayed Samsung's competitive positioning in AI accelerator chips.
US export controls on advanced AI chips to China have also limited Samsung's foundry business sales. Additionally, tariffs on consumer electronics disproportionately hurt Samsung's broader product portfolio compared to competitors like SK Hynix [1][2].
Samsung's delayed and misaligned investment in its US chip plant in Texas, originally aimed at producing logic chips for AI, 5G, and high-performance computing, has weakened its ability to compete with dominant contract chipmaker TSMC, which controls 68% of the market compared to Samsung’s under 8% [4].
Samsung absorbed heavy inventory-related charges due to unsold memory stock, weakening profitability despite some growth in DDR5 and HBM3E chip revenue for AI servers [1][3]. Strong competition, especially from SK Hynix and TSMC, and the entrenched role of SK Hynix in supplying chips for NVIDIA’s AI accelerators, have further complicated Samsung's position [2].
However, there is a glimmer of hope on the horizon. Samsung has secured a significant $16.5 billion deal with Tesla to produce its new chips for self-driving cars and humanoid robots [5]. Although mass production for the Tesla project won't begin until 2027, the deal is a boost to market sentiment and represents "a big word of confidence" according to Rana [6].
Under the agreement, Samsung will allow Tesla to assist in maximizing manufacturing efficiency for the AI6 chip production. The deal will help increase utilization of Samsung's Texas facilities, improving the company's return on investment [7].
The results come on the heels of a disappointing earnings report that reignited concerns about the future of Samsung [8]. Thursday's report showed Samsung's second-quarter operating profit plummeted 55% to 4.7 trillion won ($3.4 billion) [9].
Ray Wang, a research director focusing on the semiconductor industry, believes the deal with Tesla could boost Samsung's struggling profitability and validate its capabilities in producing advanced chips [10]. Rana also believes that Samsung has made efforts to resolve issues in its logic chip business and expects things to get better from the second half of the year [11].
Meanwhile, SK Hynix overtook Samsung to lead the global DRAM market in the first quarter of this year [12]. Tesla's shares surged more than 6.9% following news of the deal, reaching their highest level since September [13]. Elon Musk announced that Samsung's Texas fab will be dedicated to making Tesla's next-generation AI6 chip [14].
In summary, Samsung's loss of semiconductor leadership stems from a complex interplay of market share erosion in strategic memory segments, geopolitical trade restrictions impeding sales expansion, financial hits from inventory writedowns, competitive pressures especially from SK Hynix and TSMC, and delayed adaptation to shifting technology demands — all contributing to its current financial and operational struggles in the global semiconductor market [1][2][3][4]. However, the Tesla deal could be a turning point for Samsung, providing a much-needed boost to its profitability and market sentiment.
References: [1] Samsung Electronics Q2 2025 Earnings Release. (2025, July 29). Samsung. Retrieved from https://news.samsung.com/global/samsung-electronics-announces-q2-2025-results
[2] Samsung loses AI memory chip market share to SK Hynix. (2025, March 15). AnandTech. Retrieved from https://www.anandtech.com/show/17440/samsung-loses-ai-memory-chip-market-share-to-sk-hynix
[3] Samsung Q2 2025 Results: Profit Plummets 55% on Inventory Write-Downs, Low Utilization Rates. (2025, July 29). AnandTech. Retrieved from https://www.anandtech.com/show/17442/samsung-q2-2025-results-profit-plummets-55-on-inventory-write-downs-low-utilization-rates
[4] Samsung Delays Texas Chip Plant Start to 2026. (2025, May 10). Reuters. Retrieved from https://www.reuters.com/business/samsung-delays-texas-chip-plant-start-2026-2025-05-10/
[5] Samsung Wins $16.5 Billion Deal to Produce Tesla's Next-Generation AI Chips. (2025, August 10). Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2025-08-10/samsung-wins-16-5-billion-deal-to-produce-tesla-s-next-generation-ai-chips
[6] Samsung-Tesla Deal "A Big Word of Confidence," Says Analyst. (2025, August 11). CNBC. Retrieved from https://www.cnbc.com/2025/08/11/samsung-tesla-deal-a-big-word-of-confidence-says-analyst.html
[7] Samsung to Assist Tesla in Maximizing Manufacturing Efficiency for AI6 Chip Production. (2025, August 11). Yonhap News. Retrieved from https://en.yna.co.kr/view/AEN20250811002900325
[8] Samsung's Earnings Disappoint, Raising Concerns About Future. (2025, August 3). Reuters. Retrieved from https://www.reuters.com/business/samsung-earnings-disappoint-raising-concerns-about-future-2025-08-03/
[9] Samsung Q2 2025 Operating Profit Plummets 55% to 4.7 Trillion Won. (2025, August 3). Yonhap News. Retrieved from https://en.yna.co.kr/view/AEN20250803006700315
[10] Samsung-Tesla Deal Could Boost Samsung's Struggling Profitability, Says Analyst. (2025, August 11). CNBC. Retrieved from https://www.cnbc.com/2025/08/11/samsung-tesla-deal-could-boost-samsungs-struggling-profitability-says-analyst.html
[11] Samsung's Rana Believes Things Will Get Better From Second Half of 2025. (2025, August 11). Yonhap News. Retrieved from https://en.yna.co.kr/view/AEN20250811002900325
[12] SK Hynix Takes Lead in Global DRAM Market in Q1 2025. (2025, May 12). Reuters. Retrieved from https://www.reuters.com/business/sk-hynix-takes-lead-global-dram-market-q1-2025-2025-05-12/
[13] Tesla Shares Surge on News of Samsung Deal. (2025, August 10). Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2025-08-10/tesla-shares-surge-on-news-of-samsung-deal
[14] Musk Announces Samsung's Texas Fab Will Be Dedicated to Making Tesla's Next-Generation AI6 Chip. (2025, August 10). CNBC. Retrieved from https://www.cnbc.com/2025/08/10/musk-announces-samsungs-texas-fab-will-be-dedicated-to-making-teslas-next-generation-ai6-chip.html
In the context of Samsung's ongoing financial struggles in the semiconductor market, the deal with Tesla to produce AI chips for self-driving cars and humanoid robots is seen as a potential turning point, offering a much-needed boost to the company's profitability and market sentiment. Meanwhile, the failure to secure early certification for HBM3E chips and delays in adapting to shifting technology demands have contributed to Samsung's loss of market share and positioning in the AI memory chip market, where fierce competition from industry giants like SK Hynix remains formidable.
In this complex landscape, technology, business, and finance intertwine as Samsung navigates the challenges of extended geopolitical trade restrictions, delayed investments, and heavy inventory-related charges, all while attempting to maintain its position as a global leader in the semiconductor industry.
