By Hyunjoo Jin and Heekyong Yang
SEOUL, April 30 (Reuters) – Samsung Electronics on Thursday reported record quarterly profit driven by a 49-fold jump in chip income, saying it expects a severe supply shortage to deepen next year as clients spend on AI, driving up prices of its memory chips.
The world’s top memory chipmaker by sales also said it has signed multi-year binding contracts with customers hoping to lock in supplies, without disclosing identities or terms.
A boom in the construction of AI data centres has spurred Samsung and chipmaking peers to allocate production capacity to advanced chips that Nvidia uses in its so-called AI accelerators. Even so, chipmakers are struggling to meet demand while the move also squeezes the supply of conventional chips.
“Our supply falls far short of customer demand,” Kim Jaejune, a Samsung memory chip business executive, told analysts on its post-earnings call. “Based solely on the demand currently received for 2027, the supply-to-demand gap for 2027 is set to widen even further than in 2026.”
Continued development in AI technology will translate into sustained demand growth yet supply will remain constrained for the time being considering the lead time required for new factory construction, Kim said.
A day earlier, U.S. technology majors including Alphabet, Amazon and Microsoft all signalled sustained AI spending.
Revealing the extent of the AI boom, Samsung said January-March operating profit in its cash cow chip division reached a record 53.7 trillion won ($36.15 billion) from just 1.1 trillion won in the same period a year earlier.
That made up 94% of the quarter’s 57.2 trillion won record total. That figure matched Samsung’s estimate announced earlier this month and compared to 6.69 trillion won a year prior.
Overall revenue rose 69% on year to 133.9 trillion won.
Samsung said conflict in the Middle East has not disrupted chipmaking as the firm has secured inventory and diversified sources of gases used in manufacturing. However, it flagged the risk of higher transportation costs caused by rising oil prices, and said it will ensure stable power supplies in cooperation with the South Korean government.
Shares of Samsung slipped 2.4% after rising as much as 1.8% following the earnings announcement. The stock has surged 88% this year, outstripping the broader market’s 57% gain.
The decline was likely due to investors taking profit after the stock had rallied in anticipation of robust earnings, said Hyundai Motor Securities analyst Greg Noh, who is bullish about Samsung’s 2026 outlook.
SAMSUNG READIES FOR LOOMING STRIKE
Samsung has been trying to narrow the gap with compatriot SK Hynix in supplying high bandwidth memory (HBM) chips to Nvidia, having fallen behind to the detriment of both profit and share price.
SK Hynix last week reported record quarterly profit following a fivefold jump in earnings and forecast a prolonged chip industry boom, downplaying any concern about profit margins for chips nearing their peak.
On Thursday, Samsung said it started the industry’s first mass-production sales of HBM4 chips for Nvidia’s Vera Rubin platform in February and that it is on track to more than triple HBM revenue this year versus last year.
It also said it expects to increase capital expenditure sharply this year to meet AI demand.
Still, it is bracing for potential production disruption as unions representing the majority of its workers in South Korea, especially in its chip division, consider striking over pay.
Samsung said it “plans to respond to the fullest extent through a dedicated organisation and response system to ensure that production is not disrupted.”
The chipmaker recently told a court hearing that a strike would cause “astronomical damage” and production decline, said a spokesperson at the National Samsung Electronics Union.
Samsung declined to comment on the matter.
CHIP PRICES HIT MOBILE EARNINGS
Rising prices of conventional chips dragged on Samsung’s other businesses such as mobile phones and displays.
Samsung, the world’s second-biggest smartphone maker by sales after Apple, said its mobile and network division will see profitability decline this year, weighed down by rising component costs. Profit in the division fell 35% in the first quarter to 2.8 trillion won.
Its display division, which supplies flat-screen displays for customers such as Apple, saw operating profit fall 20% to 400 billion won.
($1 = 1,485.4000 won)
(Reporting by Hyunjoo Jin, Heekyong Yang and Joyce Lee; Editing by Muralikumar Anantharaman and Christopher Cushing)
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