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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.
A boom in the construction of AI datacentres 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.”
The world’s top memory chipmaker by sales, Samsung also said it has signed multi-year binding contracts with customers hoping to lock in supplies, without disclosing identities or terms.
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, US technology majors including Alphabet, Amazon, Meta and Microsoft all signalled sustained AI spending. Samsung also said it expects to increase capital expenditure sharply this year to meet AI demand.
Revealing the extent of the AI boom, Samsung said January to March operating profit in its cash cow chip division reached a record 53.7tn won ($36.15bn) from just 1.1tn won ($774m) in the same period a year earlier.
That made up 94% of the quarter’s 57.2tn won record total. That figure matched Samsung’s estimate announced earlier this month and compared to 6.69tn won a year prior.
Overall revenue rose 69% on the year to 133.9tn won.
Samsung said conflict in the Middle East has not disrupted chipmaking as the firm has secured inventory and diversified sources of the gases vital for manufacturing like helium. 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 have surged 88% this year, outstripping the broader market’s 57% gain.
Samsung rival SK Hynix last week reported record quarterly profit after a fivefold jump in earnings and forecast a prolonged chip industry boom, downplaying any concern about profit margins for chips nearing their peak.
Still, Samsung 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.
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 2.8tn won. Its display division, which supplies flat-screen displays for customers such as Apple, saw operating profit fall 20% to 400bn won.
