Samsung Electronics Posts Record Quarterly Results, Rules Out US ADR Listing for Now

Samsung Electronics posts record quarterly results

Seeks to expand long-term memory supply contracts

Taylor Fab 2 to break ground by year-end

Smartphones, TVs turn to AI and services for growth

Samsung Electronics is moving to lock in as much as 70% of its memory production capacity under long-term supply agreements as it responds to surging demand for artificial intelligence chips. The company is also preparing to start construction of its second Taylor fab in the US by the end of this year.

The plan calls for expanding supply of high-bandwidth memory, or HBM, and server DRAM while adding foundry capacity below the 2-nanometer node ahead of demand. In finished products including smartphones, TVs and home appliances, Samsung sees pressure from component costs persisting and plans to defend profitability with AI features, premium products and services.

The company also ruled out a US American depositary receipt listing for now, saying it is not currently considering issuing an ADR.

Samsung sees memory supply tight through 2028 as it expands long-term contracts

Samsung said on its second-quarter earnings conference call on July 30 that demand is expanding beyond AI servers to general-purpose computing servers as agentic AI adoption accelerates and token consumption surges. But a major increase in supply before 2028 will be difficult because it takes more than three and a half years to build a new fab and begin wafer production.

That means the supply shortage next year will be worse than this year, the company said. On memory supply and demand, Samsung said it is planning long-term supply agreements covering 60% to 70% of total memory capacity. It has completed contracts with five global data center customers and is in the final stage of negotiations with five other large customers tied to AI demand.

Samsung said the committed demand will let it invest more flexibly and build a more stable and predictable business structure than in the past.

The company is also set to sharply expand HBM4 supply. Third-quarter HBM4 revenue will more than triple from the previous quarter, Samsung said. In the second half, HBM4 revenue is expected to account for well over 60% of total HBM revenue. The company is targeting an HBM market share in the second half roughly in line with its overall DRAM market share.

Its System LSI business plans stable sales of next-generation flagship SoCs and will pursue new opportunities in custom SoCs. Samsung also said it will strengthen the competitiveness of its image sensors, broaden their applications, and expand its high-spec display driver IC and power management chip businesses.

In foundry, Samsung said it has secured 2-nanometer projects from major cloud service providers and customers in AI and high-performance computing. The number of 2-nanometer orders this year will more than double from last year, it said.

On capacity expansion, Samsung said leading-edge capacity additions are failing to keep pace with demand. The company is preparing to begin construction of Taylor Fab 2 by the end of this year, with mass production targeted for 2030. Taylor Fab 1 remains on track to prepare for operations this year, after which Samsung plans to expand 2-nanometer capacity in stages. It is also reviewing additional fab capacity as inquiries rise for 1.4-nanometer production.

Second-quarter capital expenditure rose to 16.8 trillion won ($12.1 billion), up 5.5 trillion won from the previous quarter. Samsung spent 15.4 trillion won on its Device Solutions, or DS, division, which oversees semiconductors, and 700 billion won on display.

In memory, the company increased spending on new infrastructure in Pyeongtaek. In foundry, it stepped up investment to ensure the Taylor fab starts on time. Samsung Display began operating a new 8.6-generation IT OLED line this month to capture broader OLED adoption in the IT market and drive revenue growth.

Smartphones and TVs lean on AI and services

Samsung's Mobile eXperience, or MX, division said premium demand should hold up this year even if smartphone shipments decline, helped by broader AI adoption and form-factor innovation. The company expects both revenue and average selling prices to rise.

To support that strategy, Samsung plans to boost sales of flagship models including the Galaxy Z Fold and Flip 8 series and the Galaxy S26 series. It also plans to extend core AI experiences to the Galaxy A series.

Samsung said it will launch "intelligent eyewear" within the year, offering a new AI form factor. Its network business will focus on winning new orders and improving cost competitiveness.

In visual display, Samsung said the TV set market is stagnant while the connected TV advertising market continues to grow. The company plans to strengthen Vision AI-based experiences and content on Samsung TV Plus. It also aims to expand its advertising business and operating system licensing to reduce dependence on hardware.

Its home appliance business will expand AI-driven products and higher-margin sales channels. Harman recently strengthened its advanced driver-assistance systems and premium audio businesses through two acquisitions, Samsung said. Leveraging synergies with Samsung Electronics, Harman plans to introduce in-car IT and AI experiences and expand into autonomous driving.

Asked about the possibility of an ADR listing, Samsung said its diverse business portfolio already provides stable cash generation, limiting the need to raise new funds through an ADR. It is not considering an ADR issuance at this point, though it left open the possibility as one of several medium- to long-term options to enhance shareholder value.

Samsung said it posted second-quarter consolidated revenue of 171.5 trillion won ($123.6 billion) and operating profit of 89.5 trillion won ($64.5 billion). Both were quarterly records. The DS division reported revenue of 127.5 trillion won ($91.9 billion) and operating profit of 89.2 trillion won ($64.4 billion). The DX division posted revenue of 48 trillion won ($34.6 billion) and an operating loss of 800 billion won ($577 million).

Kim Dae-young, Hankyung.com reporter kdy@hankyung.com