Samsung warns US tariffs threaten chip and smartphone sales

Samsung sees growing risks from US tariff policies and tighter export controls on AI-related tech.

A Samsung Galaxy S25 Ultra smartphone on display during the company's annual general meeting at the Suwon Convention Center in Suwon, South Korea, on March 19, 2025. Photo by SeongJoon Cho/Bloomberg

By Anna Fadiah and Hayu Andini

Samsung Electronics has raised fresh concerns about the impact of United States tariff policies on global technology demand, stating that its semiconductor and smartphone businesses could suffer as economic uncertainty grows. The warning comes as Samsung’s chip division reported a steep drop in profits, driven in part by tougher export controls targeting Chinese artificial intelligence companies and mounting trade tensions.

Tariffs raise uncertainty for chips and smartphones

Samsung, the world's largest maker of memory chips and smartphones, said in an earnings call on Wednesday that “growing policy risks” could significantly hurt its business outlook for 2025. Chief financial officer Park Soon-cheol noted that ongoing ambiguity in US tariff policies is already affecting customer behavior, contributing to uneven demand and higher production costs.

“Ongoing uncertainty surrounding US tariff policies continues to pose a potential risk of demand slowdown,” Park said. “We believe changes to the tariff policies in major economies as well as stronger export controls against artificial intelligence have already been adding to rising uncertainties in expected demand in the second half.”

Samsung’s warning highlights a broader concern among global manufacturers who rely on cross-border supply chains and export markets. With Washington contemplating a return to “reciprocal tariffs”—a Trump-era trade policy tool designed to match other nations’ import duties—companies like Samsung are finding it increasingly difficult to forecast production and revenue.

Frontloaded orders may dent second-half performance

The temporary suspension of Trump’s reciprocal tariffs earlier this year led some customers to place early orders in anticipation of price hikes. While that strategy provided Samsung with a boost in early-year sales, the company cautioned that such frontloading could negatively affect performance in the second half of the year.

“The frontloaded orders might soften second-half demand,” Park added. “This creates an uneven revenue distribution for the year and makes forecasting more difficult.”

The outlook was further darkened by disappointing performance in Samsung’s chip division. First-quarter operating profit from its semiconductor unit dropped roughly 40 percent, despite rising global interest in high-bandwidth memory (HBM) chips used for artificial intelligence servers.

Export controls on China drag down AI chip sales

A key reason behind the declining chip performance is the U.S. government’s increasingly strict controls on exporting advanced semiconductor technologies to China. Samsung is particularly vulnerable, with analysts estimating that nearly one-third of its HBM chip sales come from Chinese customers.

Although some Chinese clients have been stockpiling memory chips ahead of potential sanctions, that surge in orders was not enough to offset the broader impact of tighter restrictions. Samsung said its HBM shipments were directly affected by Washington’s growing scrutiny of China-based AI startups, including Deepseek, which has achieved major breakthroughs this year.

Most semiconductors have so far remained exempt from the latest wave of reciprocal tariffs. However, Trump has repeatedly indicated his intention to impose duties on chips “very soon,” suggesting that tech companies could face even steeper challenges ahead.

Samsung lags behind in AI chip race

While the global AI boom has lifted the fortunes of rival SK Hynix, Samsung has struggled to keep pace. SK Hynix’s stock is up 2 percent this year, thanks in large part to its strong positioning in the lucrative HBM market. By contrast, Samsung’s shares have fallen more than 28 percent year-to-date.

One critical issue is Samsung’s delay in qualifying its most advanced HBM chips with Nvidia, the U.S.-based AI powerhouse that works with both Korean firms. Until Samsung’s HBM chips pass Nvidia’s tests, the company risks falling further behind its smaller but faster-moving competitor.

In response, Samsung ramped up its research and development spending, allocating 9 trillion won ($6.3 billion) in the first quarter alone—a 16 percent increase from the same period last year. The company also plans to scale up production of its 12-layer HBM3E chips in hopes of capturing more demand from AI server manufacturers in the months ahead.

Tariff risks loom over consumer electronics

Beyond semiconductors, Samsung’s vast consumer electronics portfolio is also under pressure. The U.S. has suspended reciprocal tariffs on dozens of countries, including South Korea and Vietnam, until July. But a minimum 10 percent duty still applies to many goods and could increase the cost of Samsung’s products, from smartphones to televisions.

Samsung produces nearly half of its smartphones in Vietnam and manufactures most of its North America-bound TVs in Mexico. With tariffs threatening to raise costs across the board, the company is now exploring strategies to minimize the fallout.

“We are preparing various measures to cope with US tariffs,” a Samsung spokesperson said, “including considering relocation of TV and home appliance production facilities.”

Market reaction and broader concerns

The warning had an immediate impact on investor sentiment. Samsung’s stock fell 0.4 percent on Wednesday, tracking losses in the broader Kospi index. While the decline was modest, it reflected investor concerns over the company’s exposure to trade and regulatory headwinds.

“The memory cycle seems to have hit the bottom, but the company’s shares have been weighed by growing uncertainties related to tariffs and regulations,” said Albert Yong, managing partner at Petra Capital Management, a Seoul-based hedge fund. “Samsung’s performance is unlikely to improve dramatically without HBM sales to Nvidia.”

Samsung’s remarks underscore the growing complexity of doing business in a global tech landscape increasingly shaped by geopolitical rivalry. As the U.S. intensifies efforts to contain China’s tech ambitions and reshapes its trade policy under Donald Trump’s renewed leadership, companies like Samsung are caught in the crossfire.

US tariffs is at the heart of this unfolding story. Whether Samsung can adapt to a shifting regulatory environment while keeping up in the AI arms race will determine much of its trajectory in 2025 and beyond. For now, its warning stands as a bellwether for how trade policy and tech innovation are colliding in the post-pandemic global economy.

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