Samsung Electronics’ strategic focus on AI has delivered high revenue in the first quarter of 2025, as the South Korean tech giant navigates semiconductor market challenges and growing global trade uncertainties.
The company posted an all-time quarterly high revenue of KRW 79.14 trillion ($55.4 billion), marking a 10% increase year-over-year, according to its financial results released on Wednesday. Operating profit climbed to KRW 6.7 trillion ($4.68 billion), representing a modest 1.5% increase compared to the same period last year.
The results exceeded Samsung’s earlier forecast of KRW 79 trillion and analysts’ expectations.
Smartphone success counters chip challenges
The Mobile Experience (MX) Business emerged as the best performer, contributing KRW 37 trillion in consolidated revenue and KRW 4.3 trillion in operating profit – its highest level in four years. The success was driven primarily by strong sales of the flagship Galaxy S25 series, which features AI abilities via Galaxy AI.
“Enhanced cost competency and price declines for some components also contributed to solid double-digit profitability,” the company’s earnings report said.
In contrast, Samsung’s Device Solutions (DS) Division, which includes its semiconductor operations, posted KRW 25.1 trillion in revenue and KRW 1.1 trillion in operating profit – a 42% decline from the previous year. The performance reflects ongoing challenges in the semiconductor market, particularly in high-bandwidth memory (HBM) sales.
“Overall earnings were impacted by the erosion of average selling price (ASP), as well as a decrease in HBM sales due to export controls on AI chips and deferred demand in anticipation of upcoming enhanced HBM3E products,” Samsung said.
Trade tensions cloud future outlook
Despite the record revenue, Samsung has expressed caution about the second quarter, dropping its usual business outlook due to growing macroeconomic uncertainties stemming from global trade tensions and slowing economic growth.
“Due to the rapid changes in policies and geopolitical tensions among major countries, it’s difficult to accurately predict the business impact of tariffs and established countermeasures,” a Samsung executive stated during Wednesday’s earnings call.
Of particular concern are US President Donald Trump’s “reciprocal” tariffs, most of which have been suspended until July but threaten to impact dozens of countries including Vietnam and South Korea, where Samsung produces smartphones and displays.
While Samsung noted that its flagship products like semiconductors, smartphones, and tablets are currently exempt from these tariffs, the company revealed that Washington is conducting a product-specific tariff probe into these categories.
“There are a lot of uncertainties ahead of us […] we are communicating with related countries to minimise negative effects,” Samsung said during the call.
In response to its challenges, the company disclosed it is considering relocating production of TVs and home appliances.
AI investment and future strategy
Despite these headwinds, Samsung remains committed to its artificial intelligence strategy, allocating its highest-ever annual R&D expenditure for 2024. In the first quarter of 2025, the company increased R&D spending by 16% compared to the same period last year, amounting to KRW 9 trillion.
For the remainder of 2025, Samsung plans to expand its AI smartphone lineup through the introduction of “Awesome Intelligence” to the Galaxy A series and the launch of the Galaxy S25 Edge in Q2. Later in the year, the company will strengthen its foldable lineup with enhanced AI user experiences.
In the semiconductor space, Samsung aims to strengthen its position in the high-value-added market through its server-centric portfolio and the ramp-up of enhanced HBM3E 12H products to meet initial demand. The company expects AI-related demand to remain high in the second half of 2025, coinciding with the launch of new GPUs.
“In the mobile and PC markets, on-device AI is expected to proliferate, so the Memory Business will proactively respond to this shift in the business environment with its industry-leading 10.7Gbps LPDDR5x products,” Samsung stated.
The company’s foundry business remains focused on its 2nm Gate-All-Around (GAA) process development, which remains on schedule despite current challenges.
Market reaction and competitive landscape
Samsung shares were trading down approximately 0.6% following the announcement, reflecting investor concerns about the uncertain outlook.
The results highlight Samsung’s complex position in the AI market – succeeding in consumer-facing applications while working to catch up with competitors in AI-specific semiconductor components.
Local rival SK Hynix, which reported a 158% jump in operating profit last week to KRW 7.4 trillion, has overtaken Samsung in overall DRAM market revenue for the first time, capturing 36% global market share compared to Samsung’s 34%, according to Counterpoint Research.
SK Hynix’s success has been particularly pronounced in the high-bandwidth memory segment, which is crucial for AI server applications.
“Samsung has assumed that the uncertainties are diminished, it expects its performance to improve in the second half of the year,” the company noted, striking a cautiously optimistic tone despite the challenges ahead.
Samsung’s record revenue masks a pivotal crossroads for the tech giant: while its AI-enhanced smartphones flourish, its once-dominant semiconductor business risks falling behind in the AI revolution.
The coming quarters will reveal whether Samsung’s massive R&D investments can reclaim lost ground in HBM chips, or if we’re witnessing a fundamental power shift in Asian tech manufacturing that could alter the global AI supply chain for years to come.
For a company that rebuilt itself numerous times over its 56-year history, the AI semiconductor race may prove to be its most consequential transformation yet.
(Image credit: Anthropic)
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