HBM misfire sends shockwaves through Samsung’s chip division

Stuck behind rivals, Samsung’s high-end memory strategy falters as inventory piles up

Samsung Electronics’ second-quarter earnings, released July 8, have amplified investor concerns over the company’s position in high-performance memory and advanced chip manufacturing. Despite aggressive expansion in high-bandwidth memory (HBM) and foundry operations, the South Korean tech giant continues to underperform rivals SK Hynix and Micron, both of which have delivered solid results amid a weak broader memory market.

Samsung’s latest results show that it is increasingly trailing its competitors in key growth segments—most notably HBM, a component critical to artificial intelligence applications. While SK Hynix and Micron are benefiting from rising AI demand and commanding leadership in premium memory, Samsung is losing ground in both sales and technological positioning.

Samsung Electronics Chairman Lee Jae-yong attends the 2025 Samsung Ho-Am Prize ceremony at the Shilla Hotel in central Seoul on June 30, 2025./News1

In its earnings preview, Samsung said it booked 74 trillion won ($53.1 billion) in revenue and 4.6 trillion won ($3.3 billion) in operating profit for the April–June quarter—down 0.1% and 55.9% from a year earlier. The figures not only missed consensus expectations of 6.3 trillion won in operating profit, but fell short of recently downgraded forecasts, underscoring deepening investor disappointment.

Analysts attribute the earnings miss primarily to a failure in HBM execution. Samsung’s bold bet on fifth-generation HBM3E production, including expanded capacity and capex, has yielded little return. Nvidia, the dominant buyer in the AI chip market, has delayed certification of Samsung’s 12-layer HBM3E, resulting in bloated inventories and rising storage costs.

“Despite solid smartphone performance in Q2, the memory division saw reduced HBM shipments and trailing-edge cost burdens, with foundry utilization also falling,” said Kim Sun-woo of Meritz Securities. He projected operating profit for the semiconductor division at just 400 billion won ($287 million). Estimated shipments of HBM remained modest—between 500 million and 600 million gigabits—well below targets.

Behind in certification, behind in market share

Chae Min-sook, an analyst at Korea Investment & Securities, noted that Samsung’s HBM certification for Nvidia has been pushed to late Q3. Meanwhile, SK Hynix and Micron are already targeting certification of HBM4—leapfrogging Samsung’s current-gen product. “Being third to market in a race where speed determines dominance is not a good place to be,” she said.

Samsung’s problems extend beyond HBM. Its NAND flash business remained unprofitable in Q2, despite aggressive production cuts. Analysts estimate losses exceeding 300 billion won ($216 million), driven by the company’s reliance on commoditized NAND segments, where demand remains weak. Competitors have shifted focus to enterprise SSDs to cushion price declines, but Samsung has lagged in pivoting.

Foundry troubles widen

The foundry and System LSI units also appear to have deepened their losses. Meritz estimates a combined deficit of 2.3 trillion won ($1.65 billion), while DS Investment Securities pegs the foundry’s standalone loss at over 2.1 trillion won. Despite securing legacy contracts—including for Nintendo’s upcoming Switch 2—Samsung continues to struggle in attracting clients for 3nm and 5nm advanced nodes.

And that gap could widen. TSMC, the dominant foundry player, is already achieving 60% yields on its 2nm process, compared with Samsung’s reported 30–40% range. Industry insiders warn of potential variability and yield risks as Samsung attempts to ramp up 2nm production later this year.

DRAM faces headwinds

Samsung’s DRAM business, its largest revenue contributor, may soon face pricing pressure. Lee Su-rim of DS Investment Securities warned of a potential correction in Q4, saying: “The positive effect from tariff-related pull-in orders and last-minute DDR4 demand may fade, and the pricing premium for DDR5 is already narrowing.”

To revive momentum, Samsung is banking on the rollout of its sixth-generation 10nm-class DRAM and its next-gen HBM lineup. However, that transition carries significant execution risk. “While completing development of 1c-based DRAM is a milestone, yield and quality remain critical unknowns,” said Sohn In-jun of Heungkuk Securities. “Only by Q3 will we get a sense of whether Samsung can translate technology into competitive volume.”

Strategic crossroads

Industry experts say Samsung’s underperformance in HBM and foundry may not be easily reversed. “Since entering the HBM3E segment, Samsung has lagged far behind SK Hynix and Micron in both share and delivery capability,” said one senior chip industry executive. “Delays in certification from Nvidia show how far behind they are—it’s unlikely Samsung can catch up this year.”