Samsung Electronics expects the global memory-chip shortage to grow more severe and continue through 2028, as booming artificial intelligence demand drives record semiconductor earnings and pushes major data-center customers toward long-term supply agreements.
TL;DR
- Samsung expects tight memory-chip supply to persist through 2028.
- It has signed deals with five major data-center operators and is nearing five more.
- Second-quarter operating profit reached KRW 89.5 trillion.
- Higher component costs pushed its mobile division into its first quarterly loss.
Samsung Locks In Long-Term Chip Supply Deals
According to Reuters, Samsung has signed supply agreements with the five largest global data-center companies and is close to finalizing deals with five other major customers. The company did not identify the customers.
“Almost all customers are requesting multi-year supply contracts,” said Jaejune Kim, Executive Vice President of Samsung’s Memory Business, during the company’s earnings call.
Samsung aims to place around two-thirds of its memory output under longer-term contracts. Reuters reported that the agreements will last at least five years and typically include upfront payments and floor-pricing provisions, helping protect Samsung from some of the extreme swings historically associated with the memory market.
The Wall Street Journal reported that Samsung expects the memory shortage to continue through 2028 as the artificial intelligence boom sustains demand for advanced chips. The publication said the company’s latest profit surge was largely driven by its semiconductor division.
AI Demand Drives Record Samsung Earnings
Samsung’s semiconductor unit posted second-quarter operating profit of KRW 89.2 trillion, up more than 250-fold from a year earlier, according to Reuters. The group’s overall operating profit reached KRW 89.5 trillion, while revenue increased 130% to KRW 171.5 trillion.
The Wall Street Journal reported that Samsung’s net profit for the three months ended June reached a record $49.64 billion, representing an increase of nearly 1,300% from the previous year. It described the company’s net profit as rising 14-fold and its semiconductor operating profit as increasing more than 200-fold.
The difference in how the publications presented the semiconductor growth rate reflects their use of rounded figures. Both reports agreed that Samsung’s chip business delivered a dramatic earnings increase as demand for artificial intelligence infrastructure strengthened pricing and sales.
Samsung also expects revenue from HBM4, its latest generation of high-bandwidth memory, to more than triple in the third quarter. Reuters noted that the company counts Nvidia and Advanced Micro Devices among its HBM customers.
Chip Prices Put Pressure On Samsung’s Mobile Business
The same chip-price surge benefiting Samsung’s semiconductor operations is hurting its consumer-device businesses. Reuters reported that Samsung’s mobile division recorded a KRW 700 billion loss, marking its first quarter in the red.
“The chips enriching one side of Samsung are now hurting the other, leaving the group more exposed than ever to memory pricing and the durability of hyperscaler demand,” said Josh Gilbert, Market Analyst at eToro, as quoted by Reuters.
The pressure highlights the unusual position of Samsung’s diversified business. Higher memory prices strengthen its component operations but raise the cost of producing smartphones, appliances and other electronics.
Samsung Expects Supply To Remain Tight
Samsung’s outlook suggests that the present shortage is no longer being treated as a temporary imbalance. Multi-year deals, advance payments and minimum pricing terms indicate that both chipmakers and customers are preparing for a prolonged period of constrained supply.
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However, investors remain cautious about whether record margins can continue if major technology companies slow their artificial intelligence infrastructure spending. Reuters reported that Samsung shares rose as much as 8.4% after the results before closing 0.7% lower.
For Samsung, the next phase will depend on whether it can expand advanced-memory production quickly enough to capture AI demand without weakening the pricing power that produced its record quarter.
