SUWON, South Korea, March 18 (Reuters) - Samsung Electronics sees strong demand for chips continuing this year, driven by the global artificial intelligence wave, but rising memory chip prices could hit computer and mobile shipments, its top executive said on Wednesday.
"We expect a favourable business environment due to the increasing demand for AI and the resulting continued shortage of memory supply," Jun Young-hyun, a Samsung Electronics vice chairman and co-CEO who oversees the company's chip business, said at the company's annual shareholder meeting in Suwon, south of Seoul.
"However, risk factors still persist, including uncertainties in the global macroeconomic environment such as tariff issues and cost burdens in the set business," he added, referring to televisions, phones and home appliances.
Bottlenecks in global supply of semiconductors stemming from robust demand for AI data centre operations have curbed memory chip supply to industries from cars and computers to smartphones.
Samsung shares have skyrocketed to record highs this year and are up 62% since January, outperforming the wider South Korean market's 34% gain and delighting shareholders.
The performance has been driven by the global memory chip shortage that has allowed it and rivals including SK Hynix and Micron to sharply hike prices. The three companies dominate global memory chip production.
At last year's shareholder meeting, Jun apologised for Samsung initially missing out on the artificial intelligence chip market, which had led to a share price and earnings slump, and tried to appease frustrated shareholders.
But the situation has since improved, with Samsung shares rising 5.3% on Wednesday following strong gains Tuesday after Nvidia CEO Jensen Huang said the South Korean company was producing Nvidia's new AI chips.
Huang's comments fuelled expectations that Samsung's foundry division, which makes logic chips for customers including Tesla, Apple and Samsung's phone division, may be able to turn around as early as next year after posting billions of dollars in annual losses in recent years, analysts said.
"Things cannot be better," 51-year-old shareholder Oh Bong-gyu said ahead of the meeting on Wednesday, citing Samsung’s stock market rally. “But I am a little bit worried about Samsung's labour union and its burden on management.”
Unions at Samsung have threatened to disrupt chip production as members vote on a plan to strike in May amid growing frustration among employees over a pay gap with key rivals.
Jun acknowledged that Samsung lagged behind rivals in terms of wage competitiveness as sluggish chip earnings had led to reduced performance pay.
"However, as we have recovered the competitiveness of our semiconductor products since last year, the payout of performance bonuses has been on a recovery trend, and we expect the wage competitiveness gap to narrow," he said.
(Reporting by Heekyong Yang and Hyunjoo Jin; Writing by Brenda Goh; Editing by Jamie Freed)
