Samsung sees chip shortage extending to 2028, touts long

By Hyunjoo Jin and Heekyong Yang SEOUL, July 30 (Reuters) - Samsung Electronics on Thursday reported a more than 250-fold jump in chip profit and announced multi-year supply deals with major data centre operators, saying it expects global chip shortages to become more acute and extend into 2028. The bullish outlook from the world's largest memory chip maker nevertheless failed to ease investor concerns about technology firms' hefty AI infrastructure spending curbing growth. Samsung stock ended down 0.7% after rising as much as 8.4%, though it fared better on the day than cross-town rival SK Hynix which ended down 5.6%. "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 South Korean conglomerate has signed supply agreements with the five biggest global data centre firms and is nearing deals with five other major players, it said without identifying them. "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. The comments come after a selloff in chip stocks in recent months due to investor concerns about the mounting cost of AI infrastructure and competition from China that could squeeze earnings. Meta Platforms booked a 91% drop in second-quarter free cash flow on Wednesday, after Alphabet last week reported its first cash-flow-negative quarter. A 250-FOLD PROFIT SURGE Samsung's semiconductor unit posted operating profit of 89.2 trillion won ($61.7 billion) in the second quarter, up more than 250-fold from a year prior. The group's operating profit rose to 89.5 trillion won, in line with its earlier estimate. Overall revenue rose 130% to 171.5 trillion won. However, surging chip prices hurt Samsung's mobile division, which reported its first quarter in the red with a 700 billion won loss. "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 analyst Josh Gilbert at eToro.