For two years investors have argued over whether the surge in memory chip prices is an ordinary industry cycle or a lasting change in how the business works. Samsung Electronics gave its answer on Thursday. Its semiconductor division reported operating profit of 89.2 trillion won, or $61.7 billion, for the three months to June, more than 250 times what it earned in the same quarter a year ago, and executives said the global shortage of memory chips will worsen in 2027 and persist into 2028.
The same quarter produced the first operating loss in the history of Samsung's phone division, 700 billion won, or about $480 million, because the memory its own factories make has become too expensive for its own handsets. The home appliance business slipped into the red for the same reason. At group level the numbers ran the other way: record revenue of 171.5 trillion won, more than double a year earlier, and net profit up almost 1,300% to 71.6 trillion won, or $49.6 billion, ahead of the 70.2 trillion won consensus compiled by FactSet.
None of it settled the argument. Samsung shares rose as much as 8.4% during the session and closed down 0.7%, more than 40% below their June peak after a broad selloff in chip stocks, and still near three times their level a year ago. The company ended June with 167 trillion won in net cash and said the board is discussing a special dividend for this year without naming an amount. The only payment approved for the quarter is the ordinary dividend of 374 won per share.
Memory chips hold data while a processor works on it. Two kinds matter here. Conventional DRAM goes into phones, laptops and ordinary servers. High bandwidth memory, or HBM, is DRAM stacked into towers and wired directly beside an AI processor, which needs to move far more data than a normal computer. HBM earns far more per wafer, and each unit of it consumes roughly three times the wafer capacity of standard DDR5. That trade, repeated across Samsung, SK Hynix and Micron, is what drained the supply of everything else.
Memory has always been sold like a commodity, priced near the spot market on contracts measured in months, with every boom ending in a glut that erased the previous one's profits. Samsung says that is changing. "Almost all customers are requesting multi-year supply contracts," Jaejune Kim, the executive vice president who runs the memory business, said on the second quarter earnings call. If that holds, the question for shareholders is no longer when the cycle turns, but how much output is already committed when it does.
Five-year deals with prepayments and price floors
Samsung said it has signed supply agreements with the five largest data centre operators in the world and is close to deals with five more. It named none of them. The structure is a rolling five-year commitment with volumes renegotiated annually, and it includes price floors, meaning a level below which the buyer keeps paying if the market falls. Korean reporting puts the customer prepayments at up to 25%. Samsung wants 60% to 70% of its memory capacity sold this way over time.
What the company did not give is the size of any of it. There is no disclosed contract value, no committed volume, no floor price, and no total for the deposits already collected. Samsung's balance sheet shows 4.47 trillion won of unearned revenue and other advances at the end of June, up 613.1 billion won in three months, but that line combines advances with accrued expenses and other items across the whole group, so it cannot be read as a memory contract figure.
Neither Samsung nor its rivals can build out of the shortage quickly. More than three and a half years pass between breaking ground on a fabrication plant and producing wafers from it, which is why Samsung puts the earliest meaningful relief at 2028. Its first plant in Taylor, Texas is due to start operating this year, and a second could reach mass production in 2030.
The strain is showing on the buyers
The reason the market did not celebrate lies with Samsung's customers. Meta reported on Wednesday that its free cash flow fell 91% to $784 million as quarterly capital spending doubled. Alphabet, a week earlier, posted the first negative free cash flow in its history at minus $5.9 billion while lifting full-year capital spending guidance to as much as $205 billion. Both are funding construction partly with debt. A five-year contract is only as good as the company on the other side of it.
The structure constrains the seller too. Floors protect Samsung if prices fall, but committing most of its capacity limits what it can charge if they keep rising. SK Hynix's record quarter landed below the most bullish forecasts for roughly that reason, and its shares fell 5.6% on Thursday. Samsung's chip unit posted a 70% operating margin, a level no analyst expects to last.
For everyone outside the data centre, the shortage is now a cost. PC makers, carmakers and appliance manufacturers compete for what is left after the long-term contracts are filled, at whatever the spot market asks. Samsung's own phone and appliance divisions are the first casualties inside the building, and on the company's own guidance they will not be the last.