By Hyunjoo Jin and Heekyong Yang SEOUL, Jan 29 (Reuters) - Samsung Electronics forecast a worsening chip shortage this year driven by the AI boom, with strong memory demand benefitting its mainstay chip business but creating headwinds for its other units like smartphones and displays. Samsung on Thursday said its operating profit more than tripled to a record high in the fourth quarter, underscoring the strong pricing power of the world's top memory chipmaker, as the race to build artificial intelligence strains chip supply and boosts prices. However, it warned surging memory chip prices are raising costs in its smartphone and display businesses, which count Apple and Samsung as customers, sending its shares down 1.2% after a sharp rally this year. "A significant shortage of memory products across the board is expected to continue for the time being," Kim Jaejune, a Samsung memory chip business executive, told analysts on its post-earnings call. Kim expected any expansion of supply to be limited in 2026 and 2027 while AI-related demand remains strong. Samsung posted 20 trillion won ($13.98 billion) in operating profit for the October to December period, in line with its estimate and up from 6.49 trillion won a year earlier. The South Korean company's revenue rose 24% to 93.8 trillion won in the quarter from a year earlier. Operating profit at Samsung's chip business, its main cash cow, surged 470% to a record high 16.4 trillion won in the fourth quarter from a year earlier, making up over 80% of its total profit. In contrast, its mobile profit declined by 10% to 1.9 trillion won, squeezed by surging chip prices. “Memory price increases are expected to accelerate this quarter and are likely to give surprise earnings, while the memory cost burden will intensify on its mobile business,” said Sohn In-joon, an analyst at Heungkuk Securities. He expects Samsung’s profit to surge five-fold to around 35 trillion won in the current quarter from a year earlier. MOBILES FACE MEMORY HEADWIND The company's mobile and display businesses warned they faced cost pressures from memory price hikes. "We anticipate that 2026 will be a more challenging year than any in the past, due to uncertainties in smartphone market demand and pressure on panel prices caused by rising memory prices," said Lee Hun, a display executive. The mobiles division plans to work with its major partners to ensure stable supply of products and would "drive resource efficiencies to minimise the risk of profit erosion," Cho Seung, a Samsung mobile executive, said during the call. Samsung co-CEO TM Roh described the acute chip shortage as "unprecedented" in an interview with Reuters, adding that he did not rule out raising prices. "How the division defends margins as the year progresses will be a key issue," said Ko Yeongmin, an analyst at Daol Investment & Securities. The display business also expects smartphone demand to weaken in the current quarter as prices soar on the memory chip supply shortage, and anticipates customers will push for price cuts. Its display business profit more than doubled to 2 trillion won on robust sales of its major customer Apple's iPhone 17 series. HBM CHIPS FOR NVIDIA Samsung Electronics said on Thursday it is on track to begin delivering its next-generation high-bandwidth memory (HBM) chips, or HBM4, in the current quarter. Analysts expect the chips to be initially shipped to Nvidia. Samsung has been trying to catch up with its cross-town rival SK Hynix, a primary supplier for the advanced memory chips crucial for Nvidia's AI accelerators, after facing supply delays that hit its earnings and share price last year. SK Hynix said on Thursday that large-scale production of its next-generation HBM was underway to meet customer requests, after booking fourth-quarter profit that more than doubled to a record. The race to build AI infrastructure prompted chipmakers to divert manufacturing capacity toward high-bandwidth memory for AI servers, squeezing the supply of conventional memory chips, which are used not only in smartphones and PCs but increasingly in data centres. Memory chipmakers are raising prices aggressively, "emboldened and confident - and taking a 'pay-it-or-leave-it' approach - because there is ample robust demand, and they can't possibly fill it all," said Tobey Gonnerman, president of semiconductor distributor Fusion Worldwide. "They’re in the enviable position of being able to dictate price, terms, etc more than ever," he said. ($1 = 1,430.3000 won) (Reporting by Hyunjoo Jin, Heekyong Yang and Joyce Lee; Editing by Jamie Freed and Sonali Paul) (The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)
