Samsung warns chip shortage will last until 2028
What's the story
Samsung Electronics has warned that the ongoing chip shortage is likely to worsen and continue until 2028. The warning comes after the company reported a massive increase in its semiconductor profits, allaying fears of a slowdown due to heavy AI spending by tech giants. Samsung's shares jumped as much as 8% before settling down at a 1.1% loss on Thursday.
Strategic moves
Supply shortage expected to worsen in 2027
Jaejune Kim, Executive VP of Samsung's memory business, said during an analyst call that "the supply shortage in 2027 is expected to worsen compared to this year, and it is expected to continue in 2028."
He revealed that Samsung has signed long-term supply agreements with the top five global data center firms and is close to finalizing deals with five other large companies.
Capacity allocation
Long-term agreements with top data center firms
The long-term agreements signed by Samsung are expected to last at least five years and account for 60% to 70% of its total capacity in the long term.
These contracts include upfront payments and floor pricing strategies aimed at mitigating risks associated with capital investments.
Ryu Young-ho, a senior analyst at NH Investment & Securities, said, "Management's commentary on the conference call was better than expected."
Profit surge
Record profits for Samsung's semiconductor division
Samsung's semiconductor division posted a record operating profit of 89.2 trillion won ($61.7 billion) in Q2, up over 250 times from the same period last year.
However, the spike in chip prices impacted the company's mobile division, which reported a loss of 700 billion won, the first time it has gone into the red in a quarter.
Revenue expectations
HBM4 revenue expected to more than triple in Q3
Samsung, which supplies high-bandwidth memory (HBM) chips for AI processors to NVIDIA and AMD, expects its HBM4 revenue to more than triple in Q3.
The company said this would help align its HBM market share with its overall dynamic random access memory (DRAM) chip market share in the second half of the year.
Business recovery
Foundry business recovery and expansion plans
Samsung's foundry business, which competes with TSMC and Intel, is expected to recover "in the near future" due to increasing factory utilization rates and chip prices.
The company also announced plans to start operations at its Taylor fab in Texas this year and break ground on a second one that could start mass production in 2030.