Samsung sees chip shortage worsening, but keeps investors in suspense on returns

SEOUL: Samsung Electronics said on Thursday it expects an artificial intelligence (AI)-driven memory chip shortage to deepen next year, after posting nearly a ninefold jump in quarterly profit on robust demand for AI chips.

But a lack of fresh details from the world's top memory chipmaker on plans to return its AI windfall to shareholders, along with chip earnings falling slightly short of lofty expectations, disappointed investors, sending its shares down more than six per cent.

Shareholders' hopes were up as Samsung's cross-town rival SK Hynix on Wednesday reported better-than-expected earnings and spelled out plans to return about US$75 billion to shareholders this year.

"SK Hynix did quite a lot more than expected yesterday... it went beyond market expectations, but Samsung Electronics hasn't really changed anything from the guidance it gave before," said Lee Min-hee, analyst at BNK Investment & Securities.

Samsung, however, echoed SK Hynix's upbeat outlook, helping to ease market concerns that AI-driven chip earnings could lose momentum.

"In 2027, the (memory) business expects AI infrastructure capital expenditure to reach a historic level as the AI ecosystem expands," it said in a statement. "Increasing AI-driven demand will far exceed the industry supply in comparison with 2026."

Samsung reported operating profit of 107.4 trillion won (US$80.04 billion) for the July-to-September period, in line with its estimate and up from 12.2 trillion won a year earlier.

Its semiconductor division posted a 15-fold jump in the third quarter from a year earlier to 106.5 trillion won, accounting for almost all of the group's total profit, but that was short of analysts' estimate of 107.3 trillion won, according to LSEG.

Samsung shares opened higher but reversed course, falling as much as 6.2 per cent in morning trade, while SK Hynix rose 0.7 per cent.

The company previously said this year's shareholder returns would total between 90 trillion and 110 trillion won including 30 trillion won in third-quarter dividends.

On Thursday, it said it would finalise its next shareholder return policy in January.

HIGHER CHIP CAPEX

Capital spending in Samsung's chip division will jump 62 per cent to 76.8 trillion won this year and will rise sharply next year, the company said, as it seeks to address the supply shortage.

While demand for AI chips is expected to remain resilient, concerns about financing for AI infrastructure and rising competition from China have weighed on chip stocks in recent months.

Google parent Alphabet reported on Wednesday a massive acceleration in cash burn as it poured resources into building out AI.

The pace of memory-chip price gains is slowing as chipmakers sign more long-term supply contracts and higher chip prices weigh on demand from smartphone and personal-computer makers.

The higher memory-chip costs shrank margins in Samsung's mobile business, which fell to a loss of 800 billion won.