Samsung Electronics on Thursday reported a profit increase in its chip division exceeding 250 times and revealed multi-year supply agreements with prominent data center operators. The company anticipates that global chip shortages will intensify and persist until 2028. The optimistic perspective from the world’s largest memory chip manufacturer, however, did not alleviate investor apprehensions regarding the substantial AI infrastructure expenditures of technology companies potentially hindering growth.
The company’s net profit for the quarter ended June 30 climbed to 71.27 trillion won. Operating profit surged to 89.4 trillion won, reflecting a remarkable 19-fold increase from the previous year and aligning with the company’s prior guidance. “The chip narrative has weakened. Investors are questioning how long their record-high margins will be sustainable,” said market analyst Kim Seok-hwan, after Samsung’s chip unit booked a record 70 per cent operating profit margin. The South Korean conglomerate has entered into supply agreements with the five largest global data centre firms and is approaching agreements with five additional significant players, as stated without disclosing their identities.
“Almost all customers are requesting multi-year supply contracts,” stated Jaejune Kim, executive vice president of Samsung’s memory business, during an earnings call with analysts. Samsung aims to secure contracts covering approximately two-thirds of its memory output over the long term, according to Kim. According to Kim, these arrangements are expected to endure for a minimum of five years and generally feature initial payments along with floor pricing designed to mitigate the risks associated with capital investment. However, the increase in chip prices adversely impacted Samsung’s mobile division, which recorded its first quarterly loss, amounting to 700 billion won.