By Heekyong Yang and Hyunjoo Jin
SUWON, South Korea, March 18 (Reuters) – Samsung Electronics sees strong demand for chips continuing this year, driven by the artificial intelligence wave, but rising memory chip prices could hit computer and mobile shipments, its top executive said on Wednesday.
Co-CEO Jun Young-hyun said it is working with key customers to shift from traditional annual or quarterly supply agreements to multi-year contracts of three-to-five years to mitigate the effects of cyclical demand fluctuations.
Many shareholders management after share prices and earnings hit a record high, a dramatic turnaround from last year when its management apologised for lagging rivals in the AI race.
He said Samsung was now a key partner with Nvidia in AI infrastructure, citing Nvidia’s GTC conference where CEO Jensen Huang announced a foundry partnership with the Korean firm and praised its HBM4 chips.
Jun said the industry is entering an “unprecedented supercycle,” driven by growing investment in AI infrastructure. But he was wary of market concerns about an AI bubble, while saying power supply constraints were also a major bottleneck for AI datacentres.
“We expect a favourable business environment due to the increasing demand for AI and the resulting continued shortage of memory supply,” Jun, who oversees the company’s chip business, said at the company’s annual shareholder meeting in Suwon, south of Seoul.
“However, risk factors still persist, including uncertainties in the global macroeconomic environment such as tariff issues and cost burdens in the set business,” he added, referring to televisions, phones and home appliances.
MAJOR TURNAROUND
Bottlenecks in global semiconductor supply stemming from robust demand for AI datacentres have curbed memory chip supply to industries from cars and computers to smartphones.
Samsung shares skyrocketed to record highs this year and are up 62% since January, outperforming the wider Korean market’s 34% gain and delighting shareholders.
The performance has been driven by the global memory chip shortage that has allowed it and rivals including SK Hynix and Micron to sharply hike prices. The three companies dominate global memory chip production.
At last year’s shareholder meeting, Jun apologised for Samsung initially missing out on the artificial intelligence chip market, which had led to a share price and earnings slump, and tried to appease frustrated shareholders.
But the situation has since improved, with traditional chip prices surging and Samsung narrowing the gap with SK Hynix in the race to develop high bandwidth memory, or HBM, chips.
“Things cannot be better,” 51-year-old shareholder Oh Bong-gyu said ahead of the meeting on Wednesday, citing Samsung’s stock market rally. “But I am a little bit worried about Samsung’s labour union and its burden on management.”
Unions at Samsung have threatened to disrupt chip production as members vote on a plan to strike in May amid growing frustration among employees over a pay gap with key rivals.
Jun acknowledged that Samsung lagged rivals on wage competitiveness as sluggish chip earnings hit performance pay.
“However, as we have recovered the competitiveness of our semiconductor products since last year, the payout of performance bonuses has been on a recovery trend, and we expect the wage competitiveness gap to narrow,” he said.
(Reporting by Heekyong Yang and Hyunjoo Jin; Writing by Brenda Goh; Editing by Jamie Freed and Sam Holmes)
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