Samsung Warns US Tariffs Threaten Chip and Smartphone Sales

Tone & Political Bias: Moderately Center-Leaning 

Why: The article neutrally reports economic and policy developments affecting Samsung, citing multiple perspectives including company statements, analyst views, and market reactions, without taking a political stance.

Samsung Cautions Against Tariff Impact

Samsung Electronics, the world’s largest memory chip and smartphone maker, has issued a warning that ongoing and future US tariffs may hurt global demand for its products. The company reported weaker-than-expected results and a cautious outlook for the rest of the year.

During its latest earnings call, the South Korean tech giant said "growing policy risks" and tighter trade regulations, particularly involving the US and China, could lead to higher prices for smartphone components and weakened global sales.

Tariffs and Trade Tensions Create Uncertainty

Samsung's Chief Financial Officer, Park Soon-cheol, stated that persistent US tariff uncertainty poses a real risk to future demand. The company emphasized that changes in US trade policy, combined with stronger export controls targeting artificial intelligence (AI)-related technologies, are already making the market more unpredictable.

While the temporary pause in US "reciprocal tariffs" encouraged some customers to rush orders earlier in the year, Samsung warned this could lead to a slump in demand in the second half.

US-China Export Controls Add Pressure

Samsung’s memory chip business, particularly high-bandwidth memory (HBM) chips used in AI servers, has taken a hit from tightened US export controls on China. The company saw a roughly 40% drop in operating profit for the first quarter.

Analysts estimate that about one-third of Samsung’s HBM sales come from China. The export restrictions now outweigh the short-term benefits gained from Chinese companies' stockpiling chips in anticipation of future US restrictions.

Market Reactions and Competitive Landscape

Samsung shares fell 0.4% on the day of the earnings announcement and are down over 28% for the year. In contrast, rival SK Hynix has seen its stock price increase 2%, benefitting from stronger demand and positioning in the HBM segment.

One major concern is Samsung's delay in qualifying its advanced HBM chips with Nvidia, a key customer for AI applications. Meanwhile, SK Hynix is already meeting this demand effectively.

Rising Costs and Investment in R&D

Despite the challenges, Samsung is increasing its investment in technology. The company spent ₩9 trillion (about $6.3 billion) on research and development in the first quarter, up 16% from last year. This includes work on its latest 12-layer HBM3E chips, which are expected to meet growing demand from AI server manufacturers in the coming months.

Still, experts say this effort may not pay off quickly. “Samsung’s performance is unlikely to improve dramatically without HBM sales to Nvidia,” said Albert Yong, managing partner at Petra Capital Management.

Future Strategy and Production Shifts

Samsung said it is evaluating various responses to deal with upcoming tariff changes. One consideration is relocating the production of TVs and home appliances, which are currently made in countries like Mexico and Vietnam. Nearly half of Samsung’s smartphones are produced in Vietnam, while most TVs for the US market come from Mexico.

Although the US has suspended some reciprocal tariffs for countries, including South Korea, until July, a minimum 10% duty still applies. This is expected to raise consumer prices for Samsung’s devices, including smartphones and televisions.

Bottom Line 

Samsung is preparing for a tougher business environment due to increasing trade restrictions, particularly from the US. While the company is investing heavily in innovation, ongoing tariff uncertainty and delayed product qualifications are clouding its recovery prospects.