Reuters, April 7, SEOUL – Due to weak sales of AI chips and ongoing losses in its contract chip manufacturing division, Samsung Electronics (005930.KS), which opens a new tab, is predicted to report a 21% decline in first-quarter profit on Tuesday. The largest memory chip manufacturer in the world, which is now undergoing a management change after co-CEO Han Jong-Hee passed away unexpectedly in late March, is scheduled to release preliminary first-quarter earnings on Tuesday.

Falling Behind in the AI Chip Race

Since the middle of last year, Samsung has struggled with declining chip profitability, slipping behind major rival SK Hynix (000660.KS), which opens a new page in providing high-performance memory chips to Nvidia (NVDA.O), the leader in AI processors.

Chinese Market Becomes Samsung’s Lifeline

The South Korean electronics behemoth is now largely dependent on Chinese consumers seeking less sophisticated products that are exempt from U.S. export restrictions as a result of its difficulties in the high-end market. After front-loading in the previous quarter in anticipation of additional U.S. sales limitations, Ryu Young-ho, a senior analyst at NH Investment & Securities, projected that Chinese clients’ demand for AI chips decreased in the first quarter.

Expected Earnings and High Volatility in Chip Pricing

According to LSEG Smart Estimate, Samsung is expected to record operational profit for the January–March quarter of 5.2 trillion won ($3.62 billion). In the same time frame last year, it declared a profit of 6.6 trillion won. According to analysts, Samsung’s comparatively high exposure to commodity chips has made its profitability more susceptible to price volatility, even if the company is working on a revamped version of its most advanced HBM chips to serve important clients.

Memory Chip Prices in Freefall

According to TrendForce statistics, the first quarter of this year saw:

  • 25% decrease in the price of select DRAM memory chips, which are extensively used in PCs and smartphones.
  • A decrease in the cost of NAND flash chips, which are used in data storage.

U.S. President Donald Trump’s extensive reciprocal tariffs on its trading partners are also expected to increase the price of Samsung’s range of products, which includes TVs, laptops, smartphones, and home appliances.