Samsung Electronics said it expects the memory-chip shortage to persist through 2028, positioning the world's largest memory-chip maker to extend its streak of record earnings as the artificial-intelligence boom continues.
The South Korean technology titan gave the upbeat outlook after reporting a 14-fold jump in net profit for the second quarter. The profit surge was largely driven by its core semiconductor division, which posted a staggering 200-fold-plus increase in operating profit, fueled by robust demand for advanced AI chips.
Shares of the company shot up more than 8% on the bullish guidance and strong results, putting them on track to snap a two-day selloff triggered by resurfacing concerns about the sustainability of the AI investment boom. The stock has tumbled about 40% from its June peak amid a broader chip-sector rout, but it has still nearly tripled over the past year.
Samsung's memory business chief, Jaejune Kim, highlighted the severity of chip supply shortages, saying customers are seeking multiyear contracts to secure memory supply, which continues to lag behind demand.
"Demand left unmet this year because of supply shortages is being deferred to next year," Executive Vice President Kim said on the earnings call Thursday. "Supply shortages are expected to worsen further in 2027 and persist into 2028."
He said Samsung is expected to lock in 60%-70% of its total chip-production capacity under five-year supply contracts, which can be renewed annually after their expiration, with volumes and other terms subject to renegotiation.
Samsung has already finalized such multiyear contracts with five major global AI data-center customers, and it is in the final stages of negotiations with five others, Kim said.
With strong semiconductor demand expected to persist through the second half of the year, Samsung projected that overall results would continue to improve.
Net profit for the three months ended June reached a record 71.625 trillion won, equivalent to $49.64 billion, a nearly 1,300% increase from a year earlier. That figure surpassed the 70.170 trillion won consensus estimate compiled by FactSet.
Revenue for the quarter more than doubled, hitting a record 171.500 trillion won, while operating profit soared 19-fold to a record 89.492 trillion won. Both metrics were largely in line with the company's preliminary estimates.
Samsung's chip-making division was the core growth engine, delivering record operating profit of 89.2 trillion won. That accounted for most of the company's overall operating income for the quarter.
Conversely, its smartphone and home-appliance businesses posted modest operating losses, as higher prices of chips and other components weighed on profitability.
Samsung said Thursday that it plans to break ground on its second chip-fabrication plant in Taylor, Texas, by the end of 2026, targeting mass production in 2030. Construction of the first plant is proceeding as scheduled, with operations expected to begin this year.
Eon Hwang and Y.J. Kim of Nomura said ahead of the earnings results that they expect Samsung to gain from rising prices of DRAM and NAND products--the two main types of memory chips. Strong demand and tight supply are likely to push prices 15%-20% higher sequentially in the July-September quarter, they said.
Samsung said Saturday that it signed a memorandum of understanding with U.S. chip designer Broadcom to expand their partnership, part of which will see them collaborate on the supply of next-generation high-bandwidth-memory products for AI. The companies expect the collaboration to be worth more than $200 billion over five years through 2030.
Comments