Samsung warns US tariffs and export curbs will dampen chip and smartphone demand

Samsung warns US tariffs and export curbs

Samsung Electronics has issued a warning that US tariffs and tightening export controls are casting a shadow over global demand for its products, as it grapples with a challenging business environment shaped by President Donald Trump’s trade policies. The South Korean conglomerate, the world’s largest producer of memory chips and smartphones, said these policy shifts would raise costs, hurt sales, and inject uncertainty into its semiconductor and mobile divisions, the Financial Times reported.

“Growing policy risks” are increasing unpredictability for the chip business, said CFO Park Soon-cheol during the company’s earnings call on Wednesday. He cautioned that US tariffs would raise the price of smartphone components, leading to a slowdown in mobile device demand.

AI chip sales hurt by US export controls

Samsung’s high-bandwidth memory (HBM) chip business, which powers artificial intelligence hardware, has been hit particularly hard. The company reported a nearly 40% drop in first-quarter operating profit in its chip division, citing tighter US restrictions on sales to Chinese firms. Analysts estimate China accounts for about one-third of Samsung’s HBM chip sales.

While Chinese customers rushed to stockpile memory chips ahead of the tariffs, the resulting frontloading may have already peaked. Samsung warned that this could weigh on second-half demand, despite strong AI server prospects. Trump’s pause on the full implementation of “reciprocal tariffs” prompted some early orders, but Samsung expects the momentum to slow as the trade outlook remains unstable.

Falling behind rivals in AI chip race

Samsung’s struggles come as rival SK Hynix pulls ahead in the HBM market. SK Hynix shares have gained 2% this year, while Samsung’s have plunged more than 28%, dragged down by investor concerns that it has failed to capitalise on the AI-driven chip boom. Notably, Samsung’s next-generation HBM chips have yet to pass performance qualifications for Nvidia, one of the largest customers in the industry.

Despite these challenges, Samsung is pushing ahead with innovation. The company increased its R&D spending by 16% year-over-year in the first quarter, totalling ₩9 trillion ($6.3 billion), and plans to ramp up production of its 12-layer HBM3E chips in anticipation of growing AI demand.

Tariff fallout hits smartphone and TV production

While most semiconductors have so far been exempt from Trump’s tariffs, he has warned that chip duties are coming “very soon.” Currently, a 10% minimum tariff still applies to products from countries like South Korea and Vietnam, raising the costs of consumer electronics, including smartphones and TVs. Samsung manufactures nearly half of its phones in Vietnam and assembles most North American TVs in Mexico—both countries currently subject to US trade pressure.

Samsung said it is exploring contingency plans, including shifting production of TVs and home appliances away from current sites to mitigate the tariff burden.

Outlook clouded despite bottoming of memory cycle

Some analysts believe the worst of the memory chip downturn may be over, but Samsung’s performance will remain constrained unless it can improve its competitiveness in the AI chip segment. “Samsung’s performance is unlikely to improve dramatically without HBM sales to Nvidia,” said Albert Yong of Petra Capital Management.

For now, the company is bracing for further instability. With Trump’s trade measures likely to remain in flux through mid-year and beyond, Samsung’s growth ambitions remain tied to how quickly it can adapt to geopolitical and technological headwinds.