Samsung’s Q2 Profit Plunges 56% Amid Semiconductor Inventory Woes

Sluggish Demand and Write-Downs Hit South Korean Tech Giant

In a sharp reversal of its recent momentum, Samsung Electronics announced that its operating profit for the second quarter of 2025 fell by 56% year-over-year, totaling ₩4.6 trillion KRW (approximately \$3.5 billion USD). This marks the first time in six quarters that the South Korean tech titan’s quarterly profit dipped below the same period of the previous year. The decline stems largely from inventory valuation losses on memory chips, as global demand for PCs and smartphones continues to underperform.

Samsung’s revenue for the quarter dipped slightly by 0.1%, totaling ₩74 trillion KRW. This effectively ends the company’s streak of revenue and profit increases over the previous five quarters, which had begun in Q1 2024.

The drop in profitability is primarily attributed to the oversupply of DRAM and NAND memory chips, used widely in consumer electronics and electric vehicles. While Samsung has been a dominant force in the semiconductor market, it now faces growing challenges from rising inventories, a saturated consumer electronics market, and fierce competition from TSMC, Kioxia, and Rapidus.

The impact is especially felt in the PC and smartphone sectors, where chip demand remains weak. Even though power semiconductors used in electric vehicles (EVs) offer potential growth, they haven’t yet compensated for the drop in traditional consumer electronics.

Samsung’s performance will continue to be shaped by shifts in global semiconductor supply chains, strategic pivots by rival companies, and recovery in tech spending. Despite this quarter’s drop, Samsung is expected to invest heavily in AI-related chip production and EV semiconductors, aiming to diversify its revenue streams.

What Undercode Say:

Samsung’s 56% drop in Q2 operating profit is a wake-up call not just for the South Korean conglomerate, but for the global tech industry that’s heavily reliant on the semiconductor market’s cyclical nature. The massive write-downs tied to overstocked memory chips highlight a growing problem—misaligned production planning in the face of macroeconomic uncertainty.

PC and smartphone sales haven’t bounced back post-pandemic the way manufacturers had hoped. Samsung, being the world’s largest memory chip maker, is especially vulnerable to this contraction. While it attempted to capitalize on the AI boom and EV-related chip demand, those areas still form a small part of its semiconductor revenue pie.

What’s also notable is the razor-thin 0.1% decline in revenue despite such a significant profit fall. This indicates that cost inefficiencies and valuation losses, rather than sales collapse, are to blame. In fact, if Samsung cannot realign its supply with real-world demand more efficiently, we could see prolonged earnings volatility in the quarters to come.

Meanwhile, competitors like TSMC are leaning heavily into advanced foundry services for AI accelerators, and Kioxia is doubling down on NAND tech. Rapidus, the Japanese state-backed foundry initiative, is also aiming to disrupt the high-end chip space by the late 2020s. These strategic plays could further squeeze Samsung’s margins unless it adapts swiftly.

Samsung is also caught between geopolitical shifts in the chip supply chain—tensions between the U.S. and China, export controls, and moves by nations to localize chip manufacturing are complicating logistics and market strategy.

Unless

In the near term, expect Samsung to scale back production, cut costs, and possibly delay capital expenditures in low-return segments. If inflation remains sticky and consumer confidence weak, that caution could extend well into 2026.

Samsung’s outlook isn’t catastrophic—after all, it’s diversified across mobile, display, and consumer electronics—but the semiconductor division’s drag is currently too heavy to ignore. The next few quarters will be crucial in determining whether its AI and EV plays are bold enough to offset the slump in its memory empire.

🔍 Fact Checker Results:

✅ Samsung’s 56% YoY decline in Q2 profit was officially reported in Korean media on July 8, 2025.
✅ Inventory valuation losses were primarily linked to DRAM and NAND chips.
✅ Revenue remained largely flat YoY, showing resilience in sales despite profit compression.

📊 Prediction:

If consumer electronics demand doesn’t rebound by Q4 2025, Samsung may announce further production cuts in its memory division. However, with AI servers and EVs increasingly requiring high-performance chips, Samsung’s 2026 earnings may see a turnaround, driven by its upcoming investments in AI-specific DRAM and HBM technologies. Expect aggressive marketing and partnership announcements in the next two quarters as Samsung seeks to recapture narrative control in the chip war.