Two major South Korean tech behemoths, Samsung Electronics and LG Electronics, have released preliminary reports on their financial results for the second quarter of fiscal 2025, and these results paint a troubling portrait of a changing trade environment where declining profits and softening consumer demand foretell a challenging road ahead. Both companies reported modest revenue declines and more dramatic operating profit declines as each scrambles to adjust operations for a challenging business environment.
Read all about the strong headwinds buffeting Samsung and LG
Although analysts had expected a negative impact on the numbers from both of these companies, the scale of the performance shortfall caught them by surprise. Samsung Electronics, the largest company in South Korea, reported that its revenues in the quarter that ended in June came in at 74 trillion won, down slightly from revenues of 74.07 trillion won in the same quarter last year.
However, operating profits – a key metric for Asian companies – came in at only 4.6 trillion won ($3.3 billion) in the quarter, a drop of 56% on a year-over-year basis. Analysts had forecast Samsung operating profits to decline, but only by 41%. That makes this a significant miss.
LG’s Results Echoed Those of Samsung’s
Likewise, LG Electronics said preliminary figures show that revenues in Q2 of Fiscal 2025 came in at 20.74 trillion won. This is down about 4.4% compared to revenues of 21.69 trillion won in the same quarter last year.
However, much like Samsung, its operating profits were a different story. The company said preliminary operating profits in the quarter this year came in at 639.1 billion won. This is down 46.6% from an operating profit of 1,196.1 billion won in the second quarter of fiscal 2024.
Samsung Mostly Pointed to Previously Discussed Issues
Samsung mostly explained its performance shortfall as a result of previously announced issues, such as its troubles completing a high-bandwidth memory chip to sell to Nvidia for use in its AI accelerator business. However, the company did make vague references to “inventory-related costs.” The company also noted the issue of new U.S. trade restrictions on sales of AI chips to China.
In looking forward to the next quarter, Samsung suggested its business would begin to see improved performance “…on a gradual recovery in demand.”
LG Pointed Directly to Changes in Trade Policy and Weakening Consumer Demand
LG, on the other hand, was much more forthcoming in pointing to the rapidly changing trade climate as a key reason for its performance downturn.
The slowdown reflects continued weakness in consumer sentiment across major markets and an increasingly challenging external environment. In particular, changes in U.S. trade policy led to higher tariff costs and intensified market competition, further weighing on performance.
LG Electronics press release, LG Releases Preliminary Earnings for Second-Quarter 2025
LG Focused on Media and Entertainment Segment
LG’s report noted that several of its divisions “delivered solid performance and maintained sound profitability.” However, when turning to its media and entertainment solutions, it noted these businesses “faced a challenging quarter due to slowdown in demand, higher LCD panel prices and increased marketing expenses amid intensifying competition.”
The company added that, “Profitability [in media and entertainment solutions] was also affected by increased costs, including U.S. general tariffs, steel and aluminum derivative tariffs, and logistics expenses.”
‘Stagnant Demand’ Dictated ‘Price Reductions’ and Greater ‘Marketing Spend’
Adding to these challenges, the media and entertainment solutions business also had to deal with price reductions “…aimed at addressing stagnant demand”…as well as being forced into “higher marketing spend” to help drive demand.
As I mentioned above, this story is based on preliminary information put out by both Samsung and LG. They will finalize their numbers and publish the final results with more detailed analysis later this month. Keep in mind that, as the figures used above were preliminary, there may be a change in the final results that will be published later.
For More Information…
Learn more about LG by visiting lgcorp.com.
See more on Samsung at samsung.com.
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