Samsung Electronics posted a staggering 250-fold jump in semiconductor profit for the second quarter, while warning that the global chip shortage will drag on through 2028 as AI data center builders fight for every memory module they can get.
South Korea's largest company reported operating profit of 89.2 trillion won (US$61.7 billion) from its semiconductor division in the April-to-June period, up from just 340 billion won a year earlier. Group-wide revenue surged 130 percent to 171.5 trillion won, fueled by relentless demand for high-bandwidth memory chips used in Nvidia and AMD AI processors. That single quarter's chip profit alone exceeded Samsung's combined semiconductor earnings over the past three years, underscoring just how much the AI boom has reshaped the memory industry.
"The supply shortage in 2027 is expected to worsen compared to this year, and it is expected to continue in 2028," Kim Jaejune, executive vice-president of Samsung's memory business, told analysts on an earnings call Thursday. His outlook on supply contradicts the market rout that recently wiped 25 percent off the Philadelphia Semiconductor Index on fears that AI spending could slow. The sector had its worst monthly slide since 2008 through July, falling 21 percent, before staging a 7 percent rebound on Thursday and Friday as dip buyers emerged.
Long-Term Deals Lock In Hyperscaler Demand
Samsung has signed long-term supply agreements with the top five global data center operators and is closing in on deals with five more large firms, Kim said without naming them. The contracts span at least five years and will cover 60 to 70 percent of Samsung's total memory capacity. They include upfront payments and floor pricing — unusual terms designed to protect Samsung's massive capital spending from a future downturn.
"Management's commentary on the conference call was better than expected, and it was one of the more reassuring calls we've heard in quite some time," said Ryu Young-ho, a senior analyst at NH Investment & Securities. The stock initially jumped 8 percent on Thursday before settling 1.1 percent lower.
The results come days after SK Hynix, Samsung's crosstown rival, posted bumper quarterly numbers that missed lofty expectations, triggering a sector-wide selloff that wiped billions from chip stock valuations. Samsung's view backs the thesis that physical fab capacity simply cannot be built fast enough to flood the market before 2028. Wolfe Research analyst Chris Caso made the same case on CNBC, noting that TSMC is sold out through 2027 and new fabs take three to five years to come online.
HBM4 Revenue Set to Triple
Samsung's race to catch SK Hynix in the high-bandwidth memory market is gaining speed. The company said HBM4 revenue will more than triple in the third quarter, which should bring its HBM market share in line with its overall DRAM position by the second half of 2026. Nvidia and Advanced Micro Devices are both Samsung HBM customers, and the escalating AI arms race among hyperscalers — Microsoft, Amazon, Google, and Meta — has created a bidding war for every available HBM3E and HBM4 module.
Samsung's foundry business, which competes directly with TSMC and Intel, is also expected to turn around "in the near future" driven by higher factory utilization rates and rising chip prices. TSMC, the world's largest contract chipmaker, raised prices by up to 10 percent for 2027 earlier this month and reported 40 percent sales growth for the first half of 2026.
The company confirmed it is on track to start operations at its Taylor fabrication plant in Texas before the end of 2026 and aims to break ground on a second US fab that could begin mass production in 2030. The Taylor facility is part of a broader push under the US CHIPS and Science Act, which has already secured more than $100 billion in additional TSMC investment and hundreds of millions in awards to companies like GlobalFoundries for silicon photonics production.
Mobile Division Takes a Hit From Soaring Chip Costs
The same memory price surge that enriched Samsung's chip unit punished its mobile division. The phone business posted a 700 billion won operating loss, its first quarter in the red, as rising component costs ate into margins on Galaxy smartphones. Samsung Electronics as a whole reported operating profit of 89.5 trillion won for the April-to-June period, in line with market estimates, against 4.68 trillion won a year earlier.
"The chips enriching one side of Samsung are now hurting the other, leaving the group more exposed than ever to memory pricing and the durability of hyperscaler demand," said Josh Gilbert, an analyst at eToro.
Samsung's CFO Park Soon-cheol said the company sees little need to raise fresh capital through American depositary receipts, following SK Hynix's US market debut earlier in July. "The stable cash generation from our diversified business portfolio" makes external fundraising unnecessary, he said.
Chip Selloff Was Overdone, Analysts Say
Wolfe Research senior analyst Chris Caso argued on CNBC this week that the July semiconductor selloff was disconnected from fundamentals. TSMC is sold out through 2027, new fabs take three to five years to come online, and demand from AI training clusters shows no sign of peaking. "You just don't have the physical space to make the semiconductors right now," Caso said. "It's really hard to see a situation where oversupply hits before 2028."
Samsung raised its full-year capital expenditure guidance on Thursday, though executives did not disclose a specific figure. The money is flowing into HBM production lines, advanced packaging facilities, and the US foundry ramp in Taylor, Texas.
What Comes Next
For Samsung, the next 18 months look unusually predictable on the demand side. Five-year take-or-pay style contracts with hyperscalers mean most of its memory output is already spoken for. The risk is on the cost side: rising construction expenses in Texas, potential tariffs on Korean-made chips, and the billions needed to stay competitive with TSMC in foundry and SK Hynix in HBM.
Still, Kim Jaejune summed up the mood on the call with a stark message for anyone betting on a quick end to the chip shortage. "The physical capacity to make semiconductors at this volume does not exist yet," he said. "It will take years to build."
Browse our full Semiconductors coverage and read about GlobalFoundries' silicon photonics win or the latest CHIPS Act developments. The original earnings report is available at Reuters.