Samsung Faces Rough Road Amid Trump's Tariffs: "Stockpiling Frenzy" May Impact H2 Demand

On Wednesday this week, Samsung Electronics stated during the announcement of its Q1 financial results that due to the US tariff policy, market demand for its electronic products may decline, forcing it to abandon its outlook for Q2 performance.

Samsung Electronics said that under tariff pressure, it expects its semiconductor business to face greater uncertainty throughout the year, while its smartphone shipments will face downward pressure in Q2.

Trump's Tariffs Impact Samsung's Performance Outlook

The financial results showed that Samsung's operating profit for Q1 was 6.7 trillion Korean won (approximately $4.68 billion), an increase of 1.2% year-on-year, in line with previous expectations.

Despite Samsung's slight increase in profitability, this is not something for investors to cheer about—because the reason for thisprofit growth is that customers, worried about US tariffs, rushed to buy smartphones and chips in advance.However, this also means that product demand for Samsung in the remaining months of the year may be suppressed.

Earlier this month, US President Trump announced that he would impose hefty tariffs on Chinese goods, while the US restrictions on selling AI chips to China have become increasingly stringent. Samsung said thatthis may curb demand in the Chinese market for some electronic components produced by Samsung,such as chips and smartphone displays. China is Samsung Electronics' largest market.

In addition, Trump had previously announced that he would impose so-called "reciprocal tariffs" on many countries, including South Korea and Vietnam, which are important production sites for Samsung's smartphones and displays. Although these reciprocal tariffs have been temporarily postponed, they may still shake the stability of Samsung's supply chain.

Samsung said that in response to the tariffs, it is considering relocating the production sites of its TVs and home appliances.

Uncertainty in H2 Demand Increases Again

The company added that driven by customers' demand for early stockpiling, chip demand is expected to remain stable in Q2, butsome customers' early stockpiling of chips may have a negative impact on demand later this year.

"We believe that due to recent changes in tariff policies in major countries and the strengthening of export controls on AI chips, uncertainty in demand in H2 is increasing," said Kim Jae-jun, vice president of Samsung's memory division, during the earnings conference call.

Samsung said that it has provided samples of enhanced HBM3E products to major customers and expects HBM chip sales to rise "gradually" starting from Q2, but Samsung did not provide specific targets. Analysts estimate that about one-third of Samsung's HBM revenue comes from China.

Mehdi Hosseini, an analyst at Susquehanna, pointed out that Samsung's operating profit this quarter exceeded expectations, partly due to customers' early stockpiling ahead of the new round of tariffs. Currently, Samsung's HBM chip business mainly caters to the demand for low and mid-end AI chips from non-Nvidia customers, but this type of demand may be difficult to sustain.