Core Viewpoint - Samsung Electronics reported a significant decline in its second-quarter operating profit, which is expected to be 4.6 trillion KRW, a 56% year-on-year drop and a 31.24% quarter-on-quarter decrease, marking the lowest level in six quarters and falling short of market expectations [2][5][6]. Group 1: Financial Performance - The anticipated sales for the second quarter are projected to remain flat at 74 trillion KRW [5][21]. - The operating profit of 4.6 trillion KRW is approximately 241 million RMB, indicating a substantial decline compared to previous quarters [5][21]. - This performance is significantly below the LSEG SmartEstimate prediction of a 39% decline to 6.3 trillion KRW [6]. Group 2: Reasons for Decline - The primary reasons for the poor performance include inventory value adjustments and uncertainties due to trade tensions, which have weakened the company's profitability [3][8]. - Samsung's competitive disadvantage in the AI chip sector has become increasingly apparent, particularly in the high bandwidth memory (HBM) chip business [9][10]. - The U.S. trade policies have hindered chip sales, and the company has faced losses in its non-memory chip business due to low utilization rates and trade policies [8][17]. Group 3: Competitive Landscape - Competitors like SK Hynix and Micron Technology are benefiting from strong demand for advanced HBM chips, with SK Hynix expected to report record quarterly earnings [11][14]. - Analysts predict that by 2025, SK Hynix will hold a 57% market share in the HBM market, while Samsung's share will be 27% [12]. - Samsung's stock performance has lagged behind its competitors, with only a 15% increase this year compared to SK Hynix's 65% and Micron's 37% [14]. Group 4: Future Outlook - Despite the dismal second-quarter results, Samsung expresses cautious optimism for the second half of the year, anticipating a narrowing of losses in its foundry business as demand gradually recovers [18][28]. - Analysts suggest that Samsung's profitability may rebound in the third quarter, contingent on the progress of HBM supply to Nvidia and an overall recovery in chip demand [19][28]. - Samsung has announced a stock buyback worth 3.9 trillion KRW to boost investor confidence [28].