Key Takeaways
- Samsung expects global chip shortages to continue through 2028 despite expanding production.
- Record semiconductor profits offset losses in Samsung’s mobile division.
- Long-term AI chip supply agreements strengthen Samsung’s future revenue outlook.
Samsung Electronics said Thursday it expects the Samsung chip shortage to worsen through 2027 and continue into 2028 after reporting record semiconductor earnings and signing long-term supply agreements with major data center companies to meet growing artificial intelligence demand.
Samsung forecasts longer chip supply constraints
Samsung said demand for advanced memory chips used in artificial intelligence infrastructure continues to outpace supply, deepening the Samsung chip shortage. The company expects shortages to intensify next year and remain through 2028 despite plans to expand production, extending Samsung’s earlier AI-driven profit surge.
“The supply shortage in 2027 is expected to worsen compared to this year, and it is expected to continue in 2028,” Jaejune Kim, executive vice president of Samsung’s memory business, said during an earnings call with analysts.
Kim said Samsung has signed supply agreements with the world’s five largest data center companies and is close to finalizing similar deals with five more major customers. The agreements last at least five years and account for 60% to 70% of the company’s long-term production capacity. They also include upfront payments and minimum pricing provisions designed to reduce investment risks.
Samsung’s outlook helped ease investor concerns that slowing spending on AI infrastructure could weaken demand for memory chips. Shares rose as much as 8% during Thursday’s trading before trimming gains.
Chip business posts record profit as mobile unit records loss
Samsung’s semiconductor division reported an operating profit of 89.2 trillion won ($61.7 billion) for the April-to-June quarter, an increase of more than 250-fold from the same period last year. The company reported total operating profit of 89.5 trillion won ($61.98 billion), while quarterly revenue increased 130% year over year to 171.5 trillion won.
The strong performance reflects rising prices for memory chips used in AI systems, driven by the Samsung chip shortage. However, higher chip costs weighed on Samsung’s smartphone business, which reported a 700 billion won operating loss, its first quarterly loss.
“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, an analyst at eToro.
Ryu Young-ho, senior analyst at NH Investment & Securities, said Samsung’s comments during the earnings call exceeded expectations.
“Management’s commentary on the conference call was better than expected, and it was one of the more reassuring calls we’ve heard in quite some time,” Ryu said.
AI demand drives expansion plans
Samsung said revenue from its next-generation HBM4 memory chips is expected to more than triple during the third quarter amid the worsening Samsung chip shortage. The company supplies high-bandwidth memory chips to customers including Nvidia and Advanced Micro Devices for AI processors.
The company also said its foundry business expects to recover soon as factory utilization and chip prices improve. Samsung plans to begin operations at its Taylor, Texas, semiconductor plant later this year and aims to start construction of a second facility that could begin mass production in 2030.
Samsung said it has no plans to issue American depositary receipts despite rival SK Hynix’s recent U.S. market debut. Chief Financial Officer Park Soon-cheol said the company sees little need to raise additional capital because of strong cash generation across its business portfolio.
Samsung’s results came one day after SK Hynix also reported strong quarterly earnings while announcing plans to increase capital spending by about 50% this year to support growing AI demand, amid the ongoing Samsung chip shortage, CNBC reported.
