The Korea Exchange saw Samsung Electronics (KRX:005930) close at 249,500 won on Friday, representing a 7.6% decline from the previous session. The drop comes as the company's preliminary second-quarter results show a robust operating margin of 52.3%, yet market participants are increasingly wary of the underlying composition of those profits.
According to Samsung's preliminary figures, operating profit for the second quarter is expected to reach approximately 89.4 trillion won, a 56.2% increase from the first quarter's 57.23 trillion won. Revenue is projected at around 171 trillion won, up 27.7% from the prior quarter. However, the stock has fallen 21.5% since its close on July 6, the day before the initial guidance was released.
The disparity between earnings growth and share price performance is stark. While the headline numbers suggest a strong quarter, a deeper look reveals that the Device Solutions segment, which includes memory chips, contributed 53.7 trillion won to the operating profit—nearly 94% of the total. This extreme concentration leaves Samsung highly vulnerable to any downturn in memory-chip prices.
Analysts are also flagging potential trouble in the mobile phone division. Rising memory costs are squeezing margins, and some experts anticipate that the segment could post its first-ever quarterly loss. Omdia data indicates that memory and storage account for over 60% of material costs in budget smartphones and more than 30% in high-end models. Samsung recently raised the prices of its two new foldable phones by $100, a move that may not fully offset the cost pressures.
Broader market sentiment was also negative on Friday. SK Hynix (KRX:000660) shares fell 8.34%, and the KOSPI index dropped over 5%, reflecting widespread de-risking. Samsung shares had previously risen 2.2% from their July 16 close before the holiday, and a brief uptick to 270,000 won on Thursday helped mitigate the week's losses, but the overall trend remains bearish.
Regulatory changes are adding to the market's focus. South Korean regulators have moved forward the deadline for a 30 million won deposit requirement to July 31, affecting retail investors trading leveraged single-stock funds. Investments linked to Samsung and SK Hynix have been flagged for increasing volatility.
Samsung's earnings call is scheduled for July 30 at 10 a.m. KST. Analysts are expected to scrutinize segment-level margins rather than the group's headline figures. Key questions include whether the company can sustain its chip margins while protecting its phone business from rising component costs.
Supply data from China adds another layer of complexity. China's CXMT has recently priced comparable server-memory modules higher than Samsung's approximate $1,240 level, according to Reuters sources. While CXMT lags by two generations in high-bandwidth memory technology, its proposed factories could more than double its production capacity, potentially intensifying competition.
Risks to Samsung's outlook include reduced AI investment, a drop in memory-chip prices, and ongoing elevated component expenses that could further widen device-related losses. The upcoming earnings call will be a critical test of whether Samsung can maintain its chip margins while navigating challenges in its mobile business.
