Samsung Electronics posts historic $38.6B Q1 profit, fueled by AI chip shortage

This article is by Lee Jae-lim and read by an artificial voice. [NEWS ANALYSIS] Samsung Electronics reported an operating profit of 57.23 trillion won ($38.6 billion) for the first quarter of this year, the highest in the company's history, as a global shortage in memory chips has sent customers racing to secure supplies for their AI data center build-outs. Samsung Electronics' first-quarter operating profit represents a 755.46 percent increase from the same period last year and beat the market consensus of 40.2 trillion won, compiled by FnGuide. Notably, the figure already surpasses the company's entire annual operating profit of 43.6 trillion won in 2025. Its revenue rose 69.26 percent on year to 133.87 trillion won, surpassing analysts' estimates of 119 trillion won, and its net profit climbed 474.31 percent to 47.23 trillion won, above the 35.83 trillion won forecast. Semiconductors were overwhelmingly responsible for the strong performance, contributing nearly 94 percent to the total operating profit — a roughly 48-fold increase from the first quarter of 2025 — driven by surging demand for high bandwidth memory (HBM) used in AI infrastructure. The report highlights a broader change in the semiconductor industry. Major technology companies have been signing multiyear supply agreements with Samsung and SK hynix — a marked departure from the short-term, trust-based arrangements that historically characterized the sector. "Unlike prior supply arrangements based on mutual trust, these long-term supply contracts carry a [...] higher degree of binding commitment," said Kim Jae-june, the executive vice president of memory business at Samsung. "In an environment where investment and capacity management risks have risen sharply across every dimension — including capital outlay, contract duration and technological complexity — these agreements are expected to enhance business stability and visibility for both customers and companies." The company confirmed that contracts with select customers have already been finalized, with additional discussions ongoing. Regarding capital expenditure for the quarter, Samsung allocated 91 percent of its 11.2 trillion won to semiconductors, focusing on expanding wafer production capacity. Construction of additional manufacturing space at the P4 and P5 facilities within its Pyeongtaek campus in Gyeonggi is being accelerated to secure incremental memory output. HBM outlook and foundry progress Samsung projects its HBM revenue to more than triple this year compared to last year. Its latest-generation HBM4 is entirely sold out and is expected to account for over half of its total HBM revenue beginning in the third quarter. First samples of the next-generation HBM4E are also scheduled for shipment in the second quarter. On the foundry side, Samsung's second-generation 2-nanometer process is on track for mass production in the second half of the year, with the company targeting double-digit improvements in both revenue and earnings from the node. "The company is actively engaged in advanced collaboration discussions with multiple major AI and high-performance computing customers and expects to announce tangible outcomes with select customers in the near term," said Kang Suk-chae, the executive vice president of Samsung Foundry. Samsung's first factory at its Texas campus remains on schedule to begin operations this year and enter mass production in 2027. A second factory at the same site is in the preliminary planning stage. Samsung reported no supply chain disruptions linked to the ongoing Middle East conflict, despite Korea's dependence on the region for key chip processing materials, including helium and bromine. According to the company, it has secured alternative logistics routes and diversified its supplier base, though it warned that rising oil prices could add to production costs through higher shipping rates. Meanwhile, Samsung's union has announced that it will go on a general strike from...