Samsung Profit Seen Falling Amid Difficulties at New US Chip Plant

Samsung is reportedly delaying the completion of a chip fabrication plant it is building in Texas because it is struggling to find customers for its advanced semiconductors. And that is just one of a range of challenges it faces.

The South Korean tech giant, which was promised a $4.7-billion grant from the Biden Administration late last year, had vowed to outlay more than $37 billion in the factory in Taylor, Texas, but sources have told Nikkei Asia the deadline for the facility had been pushed back to 2026 “because there are no customers.”

As well as “weak local demand,” a chip supply chain executive was quoted as saying the production process that Samsung planned to implement at the Taylor fab “no longer meet current customer needs .. so the company is adopting a wait-and-see approach for now.”

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Construction of the plant was about 92% completed in March, the report said, but the tricky and expensive installation of new lithography (chipmaking) machines has been postponed.

Samsung, which has been making mature-node chips in Austin, another town in Texas, for nearly three decades (since 1996), is reportedly focusing on improving its production of 2-nanometre chips and securing more orders for 2nm and 4nm chips used for artificial intelligence and other high-performance computing.

But the Korean conglomerate has been hit by China’s move to boost local chip production amid intense rivalry with the US. It has also found it tough competing with TSMC, the Taiwanese chip giant and world’s leading contract chipmaker, which dominates the sector.

Meanwhile, the change of government in the US has been another major challenge.

Many of Samsung’s key businesses – chips, smartphones and home appliances – continue to face business uncertainty from various US trade policies such as President Donald Trump’s proposal for a 25% tariff on smartphones not made in the US and the July 9 deadline for “reciprocal” tariffs against many of its trading partners.

The Trump Administration is also considering revoking awards granted to foreign chipmakers such as Samsung, making it more difficult for them to receive US technology at their plants in China.

Operating profit seen falling

Given the geopolitical, technical and governmental challenges that chipmakers face, it was not surprising to hear that Samsung is expected to forecast a 39% plunge in second-quarter operating profit tomorrow (July 8).

The main reason is because of delays in supplying advanced memory chips to AI chip leader Nvidia. The world’s biggest maker of memory chips is projected to report an April-June operating profit of 6.3 trillion won ($4.62 billion), its lowest income in six quarters, according to LSEG SmartEStimate.

The prolonged weakness in its financial performance has deepened investor concerns over the South Korean tech giant’s ability to catch up with smaller rivals in developing high-bandwidth memory (HBM) chips used in AI data centres.

Its key rivals, SK Hynix and Micron, have benefitted from robust demand for memory chips needed for AI, but Samsung‘s gains have been subdued as it relies on the China market, where sales of advanced chips have been restricted by the US.

Its efforts to get the latest version of its HBM chips to Nvidia certified by Nvidia are also moving slowly, analysts said.

“HBM revenue likely remained flat in the second quarter, as China sales restrictions persist and Samsung has yet to begin supplying its HBM3E 12-high chips to Nvidia,” Ryu Young-ho, a senior analyst at NH Investment & Securities, said.

He said Samsung’s shipments of the new chip to Nvidia are unlikely to be significant this year.

Samsung, which expected in March that meaningful progress over its HBM chip could come as early as June, declined to comment on whether its HBM 3E 12-layer chips had passed Nvidia’s qualification process.

The company, however, has started supplying the chip to AMD, the US firm said last month.

Samsung‘s smartphone sales are likely to remain solid, helped by demand for stock ahead of potential US tariffs on imported smartphones, analysts said.

Shares in Samsung, the worst-performing stock among major memory chipmakers this year, have climbed about 19% this year, underperforming a 27.3% rise in the benchmark KOSPI.

As of 0447 GMT on Monday, Samsung Electronics shares were trading down 1.9% against a 0.3% rise in the KOSPI.