Samsung Discusses Resuming Next-Gen Chip Investments Amid Record Profits; Labor Risks Pose Key Variable

Soaring AI demand has caused memory chip prices to skyrocket, allowing Samsung Electronics to secure massive cash reserves along with record-breaking profits.

Based on this financial strength, the company has begun reconsidering previously delayed investments in next-generation NAND flash and advanced packaging, a key technology for the AI era.

However, wage negotiations with the labor union and the possibility of a strike remain a critical variable that will determine the final timing of these investments.

005930.KS

Samsung Electronics has begun discussions on resuming major investments that had been put on hold.

At the heart of this development is the unprecedented 'memory super-cycle'. Thanks to the explosive demand for AI, prices for memory chips like DRAM and NAND surged by over 50-90% in a single quarter. This has led to record-breaking profits for Samsung's Device Solutions (DS) division, filling its coffers with cash and providing the financial muscle needed for large-scale investments.

So, what is Samsung planning to invest in? The focus is on two critical areas: next-generation V-NAND (with over 400 layers) and advanced packaging. As AI chips become more powerful, the technology to package them efficiently has become a major bottleneck. With competitors like TSMC's capacity fully booked, Samsung has a strong incentive to build up its own advanced packaging capabilities to create a more comprehensive AI chip solution.

Supportive government policies are also providing a tailwind. First, South Korea's 'K-Chips Act' increased the tax credit for large corporate facility investments to 20%, making new projects more profitable. Second, the U.S. government granted an 'annual license' for Samsung to bring equipment into its factories in China, reducing geopolitical uncertainty and allowing for stable operations and upgrades.

However, there's one significant hurdle: labor relations. Samsung is currently in negotiations with its labor union, which is threatening a large-scale strike. While the market conditions and policy environment are ripe for investment, this labor dispute has become the most critical variable. The final decision and, more importantly, the timing of these crucial investments will likely depend on how smoothly these negotiations proceed.

[Glossary]

DS Division: Device Solutions Division, Samsung's semiconductor business unit that designs and manufactures memory chips and other components.
Advanced Packaging: A key technology for the AI era that involves stacking multiple chips vertically or placing them closely together to improve performance and power efficiency.
NAND Flash: A type of non-volatile storage technology used in SSDs, smartphones, and other digital devices to store data.