Samsung Warns Global Chip Shortages Could Continue Until 2028 as AI Demand Soars

Samsung Electronics has projected that the global semiconductor shortage could continue until 2028 as artificial intelligence (AI) adoption drives unprecedented demand for advanced chips. The company's latest earnings highlight record growth in its semiconductor business, fueled by rising memory chip demand and long-term agreements with major data centre operators. While the chip division has emerged as Samsung's biggest growth engine, increasing semiconductor prices have also impacted its smartphone business, reflecting the broader challenges of balancing AI-driven opportunities with rising production costs.

Samsung Predicts Chip Shortages Could Continue Until 2028 Amid AI Boom

AI Demand Continues to Reshape the Global Semiconductor Industry

Samsung Electronics has warned that the worldwide semiconductor supply crunch is unlikely to ease anytime soon, with shortages expected to persist until at least 2028. The company believes the rapid expansion of artificial intelligence infrastructure, cloud computing, and data centres will continue placing significant pressure on global chip manufacturing capacity.

The announcement accompanied Samsung's latest financial results, which showcased exceptional growth in its semiconductor business. Strong demand for memory chips used in AI servers and advanced computing systems has significantly boosted earnings, reinforcing confidence in the long-term outlook for the semiconductor industry.

Despite concerns in recent months that technology companies could slow AI-related investments, Samsung remains optimistic that demand will continue to expand over the coming years.

Semiconductor Business Delivers Record Profit Growth

Samsung's semiconductor division reported extraordinary financial performance during the second quarter, reflecting the growing importance of AI technologies across global industries.

The division generated an operating profit of 89.2 trillion won (approximately $61.7 billion), representing an increase of more than 250 times compared to the same period last year. This remarkable growth was driven primarily by rising demand for memory chips used in AI servers, cloud infrastructure, and high-performance computing applications.

The impressive earnings helped reassure investors that spending on AI infrastructure remains strong despite broader economic uncertainties and increasing competition within the semiconductor market.

Initially, Samsung's shares rose by nearly 8% following the announcement before ending the trading session slightly lower, reflecting mixed investor sentiment after the initial optimism.

Samsung Expects Supply Constraints to Intensify

According to Jaejune Kim, Executive Vice President of Samsung's memory business, semiconductor supply constraints are expected to become even more severe during 2027 before continuing into 2028.

Kim explained that demand from artificial intelligence applications continues to outpace manufacturing capacity, particularly for advanced memory products required in AI processors and large-scale data centres.

The company believes that ongoing investments by cloud service providers and technology firms will keep semiconductor demand at historically high levels, making supply-demand balance increasingly challenging over the next several years.

Long-Term Agreements Secure Future Production Capacity

To meet rising customer demand while reducing market uncertainty, Samsung has entered into several long-term supply agreements with leading global data centre operators.

The company confirmed that it has already signed contracts with five major global data centre companies and is close to finalising agreements with five additional large customers.

Although Samsung did not disclose the identities of these companies, it revealed that the contracts will extend for at least five years and account for approximately 60% to 70% of its long-term semiconductor production capacity.

These agreements include advance payments and minimum pricing commitments, allowing Samsung to reduce financial risks associated with large capital investments while providing customers with a more reliable chip supply.

Analysts Welcome Samsung's Positive Outlook

Market analysts viewed Samsung's projections as encouraging, particularly given recent concerns surrounding AI-related investments.

Ryu Young-ho, an analyst at NH Investment & Securities, stated that Samsung's guidance appeared more optimistic than many investors had anticipated. The company's confidence suggests that demand for AI chips remains healthy despite recent market volatility.

In recent months, semiconductor stocks have faced pressure as investors questioned whether technology companies would continue spending heavily on AI infrastructure. Additional concerns regarding increased competition from Chinese semiconductor manufacturers also contributed to weaker market sentiment.

Samsung's latest results have helped ease some of those concerns by demonstrating continued demand for advanced memory products.

Mobile Business Faces Pressure from Higher Chip Costs

While Samsung's semiconductor business continues to thrive, the company acknowledged that rising chip prices have negatively affected its mobile division.

The smartphone business reported a 700 billion won operating loss, marking its first quarterly loss in recent years.

Higher semiconductor costs have increased manufacturing expenses for smartphones and other consumer electronics, making profitability more difficult despite steady product demand.

Industry analysts noted that Samsung's growing reliance on its semiconductor business highlights both the opportunities and risks associated with the rapidly expanding AI market.

HBM4 Chips Expected to Drive Future Growth

Samsung expects one of its fastest-growing product categories to be High Bandwidth Memory (HBM), which plays a critical role in powering advanced AI processors.

The company forecasts that revenue from its next-generation HBM4 products will more than triple during the third quarter as demand continues to accelerate.

Samsung also aims to expand its market share in HBM products to match its broader position in the global DRAM industry, strengthening its competitiveness against rival semiconductor manufacturers.

With AI computing requiring significantly greater memory bandwidth than traditional applications, HBM technology has become one of the industry's most strategically important product segments.

Foundry Business Shows Signs of Recovery

Samsung also expressed confidence in the recovery of its contract chip manufacturing, or foundry, business.

Improved factory utilisation rates and stronger semiconductor pricing are expected to support higher profitability in the coming quarters.

The company remains on schedule to begin production at its new Texas semiconductor fabrication plant later this year, further expanding its manufacturing footprint.

Looking further ahead, Samsung plans to establish another advanced fabrication facility by 2030, reinforcing its long-term commitment to meeting growing global semiconductor demand.

These investments are expected to strengthen Samsung's ability to serve customers across AI, automotive, consumer electronics, and industrial sectors.

Strong Financial Results Reflect AI-Driven Growth

Samsung reported quarterly revenue of 171.5 trillion won, representing a 130% year-on-year increase.

Overall operating profit reached 89.5 trillion won, highlighting the exceptional contribution of the semiconductor division to the company's overall performance.

The results demonstrate how artificial intelligence has become a major driver of growth across the global semiconductor industry, with memory chip manufacturers benefiting from rising demand for AI servers, cloud infrastructure, and data centres.

Conclusion

Samsung's latest outlook reinforces the growing influence of artificial intelligence on the global semiconductor market. By predicting that chip shortages could continue until 2028, the company signals that demand for advanced memory and AI processors is expected to remain exceptionally strong for years to come.

Record semiconductor profits, long-term supply agreements with major data centre operators, and expanding investments in advanced manufacturing position Samsung to benefit from this ongoing transformation. However, rising chip prices have also created challenges for its mobile business, illustrating the complex balance between booming AI opportunities and increasing production costs.

As AI adoption accelerates worldwide, Samsung's strategy of expanding manufacturing capacity, investing in next-generation memory technologies such as HBM4, and securing long-term customer partnerships is likely to play a crucial role in shaping the future of the global semiconductor industry.