Not long ago, Samsung Electronics was a dominant force in the global semiconductor industry leading in memory chips and vying with Taiwan’s TSMC for supremacy in the contract chipmaking space.
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But recent missteps, particularly its slow response to the AI boom, have left the South Korean tech giant losing ground fast. Analysts say Samsung has been outpaced by rivals as it battles shrinking market share and deteriorating profits.
In the second quarter, Samsung’s operating profit fell a staggering 55% year-over-year to 4.7 trillion won ($3.4 billion), down from 10.4 trillion won ($7.5 billion) a year earlier. While overall revenue ticked up slightly, the company’s semiconductor division once its primary profit engine saw operating profit plummeted nearly 94% from the same period last year.
Shares of Samsung dropped nearly 2% in Seoul following the earnings release on Tuesday, before recovering slightly. The company attributed the poor performance to inventory valuation losses, low production utilization in its foundry business, and continued disruptions tied to U.S. export restrictions on advanced AI chips to China, one of Samsung’s major markets.
The weak results reignite concern over Samsung’s long-term competitiveness. The company had already warned of the poor quarter in its earlier guidance.
However, there was a bright spot: Samsung recently announced a $16.5 billion chipmaking deal with Tesla, expected to support future growth.
Looking ahead to the second half of 2025, Samsung said it will focus on meeting rising demand for high-value and AI-driven products, while working to enhance its position in advanced semiconductors.
Losing Its Edge
Samsung’s challenges span both major segments of its chip business: memory chips, which store data, and logic chips, which handle data processing.
Once the world’s top memory chipmaker, Samsung has ceded ground to competitors like SK Hynix and U.S.-based Micron Technology particularly in the high-bandwidth memory (HBM) segment, a crucial component for powering AI processors from Nvidia and AMD.
In logic semiconductors, Samsung continues to trail TSMC in both technology and market share. In Q1 2025, SK Hynix overtook Samsung to lead the global DRAM market, while TSMC extended its dominance in logic chips with a 68% market share compared to just 8% for Samsung, according to research firm TrendForce.
With AI demand reshaping the chip industry, Samsung faces mounting pressure to reposition itself or risk falling further behind.