Samsung Electronics believes the global shortage of advanced memory chips used for AI will continue well into 2028, signaling that demand for AI infrastructure remains far ahead of supply. Riding this wave, the South Korean tech giant has locked in multi-year agreements with major data center operators to secure long-term business while reporting record-breaking second-quarter earnings.
The company said sustained investment in AI data centers and next-generation computing is reshaping the semiconductor industry, prompting customers to secure chip supplies years in advance rather than relying on short-term purchases.
Samsung revealed that around 60% to 70% of its memory chip production capacity is expected to be committed through long-term contracts with global customers. These agreements include advance payments and minimum pricing clauses, offering both Samsung and its clients greater stability amid ongoing supply constraints.
According to the company, AI adoption is accelerating across cloud computing, enterprise software, and generative AI services, driving unprecedented demand for high-performance memory chips. Executives expect supply to remain tight through 2028 as hyperscale cloud providers continue expanding their AI infrastructure.
Samsung has already secured agreements with several major customers and is negotiating additional long-term supply deals with others, reinforcing its confidence that AI-driven semiconductor demand will remain strong for years.
"The chip narrative has weakened. Investors are questioning how long their record-high margins will be sustainable," said market analyst Kim Seok-hwan at Mirae Asset Securities, after Samsung's chip unit booked a record 70% operating profit margin.
The optimistic outlook comes alongside one of Samsung's strongest financial quarters on record. The semiconductor division delivered explosive profit growth, fueled by soaring prices for AI memory products such as high-bandwidth memory (HBM) chips used in AI accelerators from companies including Nvidia and AMD.
Overall revenue more than doubled year over year, while semiconductor operating profit surged dramatically. However, not every part of Samsung's business shared the same momentum. Its mobile division slipped into a loss during the quarter as rising memory prices increased smartphone production costs, highlighting how booming chip demand is also affecting Samsung's consumer electronics business.
"Almost all customers are requesting multi-year supply contracts," Jaejune Kim, executive vice president of Samsung's memory business, told analysts on an earnings call. Samsung aims to secure contracts covering about two-thirds of its memory output over the longer term, Kim said, joining rival efforts to reduce exposure to boom-and-bust cycles.
The deals will last at least five years and typically include upfront payments and floor pricing aimed at hedging the risk of capital investment, Kim said.
In order to leverage the AI revolution, Samsung is planning to increase its production capacities both locally and internationally. Samsung revealed plans for the launch of their new semiconductor plant in Texas in the coming months, with a second fabrication facility expected to be completed by 2030.
Furthermore, Samsung is making huge investments in packaging technology as well as next-gen HBM products. As these are now essential components of AI semiconductor infrastructure due to the need for faster and more efficient memory system, Samsung is partnering with major companies like Broadcom in the multi-billion dollar deal.
Chief Financial Officer Park Soon-cheol said Samsung is "in active discussion" over special dividends and other aspects of its shareholder return program for this year. "We remain fully committed to delivering on the program as promised and will provide for the update very soon," he said.
"Although the management did make some positive comments on shareholder returns and demand outlook, it seems due to high volatility investors are fleeing the market," said Sanjeev Rana, head of research at CLSA Securities Korea.
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The most recent projection from Samsung shows the impact of the AI revolution on the worldwide semiconductor industry. Rather than preparing for a temporary boom in demand, major semiconductor companies are planning for a lengthy period of investment supported by hyperscale cloud operators, enterprise AI adoption, and more sophisticated generative AI models.
Since buyers are ready to plan ahead for several years to ensure memory availability, the business model is switching towards building long-term relationships and capacity planning. From Samsung's perspective, the approach offers more predictable revenue streams and helps the firm position itself as a key supplier of AI-powered semiconductors of the future.