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(Bloomberg) — Samsung Electronics Co. (005930.KS) reported slower profit growth and softening demand for storage chips, a sign that the US-China trade war may be triggering cuts in artificial intelligence hardware spending.
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Executives at the chips-to-smartphones titan warned of heightened uncertainty for the rest of the year stemming from geopolitical tensions and US tariff policies.
Even before US President Donald Trump announced tariffs on almost all countries around the world, customers put some data center projects on hold, weakening demand for Samsung’s solid-state drives in the March quarter, an executive from the company’s memory business told analysts on Wednesday. Samsung’s total capital expenditure in the quarter fell more than 30% from the previous quarter to 12 trillion won ($8.4 billion).
The South Korean company’s flagship products such as semiconductors, smartphones and tablets are now exempt from the so-called reciprocal tariffs, but Trump has indicated that a tariff on the electronics supply chain including chips is in the works.
“There are a lot of uncertainties ahead of us,” said KL Roh, an executive vice president at Samsung.
Operating profit at Samsung’s chip division tumbled 42% to 1.1 trillion won due to declines in average selling price. Sales of its key high-bandwidth memory chips also fell due to export controls, with some clients also deferring orders in anticipation of upcoming enhanced HBM3E products, according to Samsung.
Its shares were down about 0.5% Wednesday afternoon in Seoul.
In recent high-profile trade talks, Seoul and Washington agreed to pursue a comprehensive package agreement by July 8, when the 90-day tariff pause is set to end.
Fears about what the final trade agreement would look like hang over Samsung’s outlook, outweighing a boost from customers stockpiling PC chip supplies ahead of US tariffs and a recovery in smartphone sales.
Donald Trump Jr. was in Seoul on Wednesday to meet with leaders of Korean conglomerates on the invitation of Shinsegae Group Chairman Chung Yong-jin, underscoring escalating concern in the country’s business community. Korean business leaders had asked Chung to facilitate the visit to establish contact with the Trump administration, according to local reports.