Shares of the leading memory chip manufacturer climbed as much as 8% before settling down 1.1% on Thursday.
“The supply shortfall in 2027 is expected to deteriorate compared to this year, and it is projected to persist into 2028,” stated Jaejune Kim, executive vice president of Samsung’s memory division, during an analyst call.
He mentioned that Samsung has secured long-term supply contracts with the top five global data center firms and is close to finalizing agreements with five additional large companies, though he did not disclose their identities.
These long-term agreements are set to last a minimum of five years and will represent 60% to 70% of Samsung’s total capacity in the long term, including upfront payments and floor pricing to mitigate risks tied to its capital investments.
“The management’s remarks during the earnings call were more optimistic than expected and among the most reassuring we’ve heard in a while,” said Ryu Young-ho, a senior analyst at NH Investment & Securities.
Samsung’s optimistic outlook comes after a significant decline in chip stocks over recent months due to investor apprehensions regarding funding for AI infrastructure and competitive pressures from China that could squeeze chip earnings.
Samsung’s semiconductor division reported an operating profit of 89.2 trillion won ($61.7 billion) for the second quarter, an increase of over 250-fold compared to the same period last year.
However, the soaring chip prices negatively affected the mobile division, which posted a 700 billion won loss—the first quarterly deficit for the division.
“The chips that are beneficial for one segment of Samsung are now posing problems for another, leaving the company increasingly vulnerable to memory pricing fluctuations and the sustainability of hyperscaler demand,” noted Josh Gilbert, an analyst at eToro.
HBM REVENUE GROWTH PICKS UP
This second-quarter profit, which exceeded Samsung’s combined earnings over the past three years, marks a significant turnaround as the company strives to catch up with Korean rival SK Hynix in providing high bandwidth memory (HBM) chips essential for AI processors.
Samsung, whose HBM customer base includes Nvidia and Advanced Micro Devices (AMD), stated it expects HBM4 revenue to more than triple in the third quarter, which will help align its HBM market share with its overall dynamic random access memory (DRAM) market share in the latter half of the year.
Samsung indicated that its foundry business, which competes against TSMC and Intel, is projected to recover “in the near future,” driven by increasing factory utilization rates and rising chip prices.
It plans to commence operations at its Taylor fabrication plant in Texas this year and aims to begin construction of a second fab that could initiate mass production by 2030.
For the April-to-June period, Samsung reported an operating profit of 89.5 trillion won ($61.98 billion), aligning with its estimate of 89.4 trillion won and significantly up from 4.68 trillion won a year prior.
The South Korean firm’s revenue surged 130% to 171.5 trillion won for the quarter compared to a year earlier.
Samsung’s local competitor, SK Hynix, reported strong quarterly results on Wednesday but failed to meet high investor expectations, announcing plans to increase capital expenditures by around 50% this year to address rising AI demand.
Samsung is not contemplating the issuance of American depositary receipts (ADRs) following SK Hynix’s recent entry into the U.S. market, according to CFO Park Soon-cheol during the earnings call.
He mentioned that Samsung sees little necessity for raising additional funds given its stable cash flow from a diversified business portfolio.
($1 = 1,446.2700 won)
