Samsung Electronics signs secretive $16.5 billion chip-supply deal

Samsung Electronics has secured a significant contract valued at $16.5 billion for the supply of semiconductors to a major international company. While the identity of the client remains undisclosed, the South Korean technology leader has confirmed that the agreement is set to commence on July 26, 2024, and will conclude on December 31, 2033. Following the announcement, Samsung's shares saw an uptick of up to 3.5% in Seoul, marking the company's largest single-day gain in nearly four weeks, as reported by Bloomberg. The company clarified that the contract pertains to chip manufacturing services; however, it refrained from revealing further details, including the buyer's identity and specific terms, to safeguard trade secrets until the end of the contract period in 2033. In its official filing, Samsung urged investors to proceed with caution, given that the main aspects of the contract remain confidential, which could lead to potential changes or even termination of the agreement as noted in a CNBC report. Samsung Electronics is a leading force in the contract chip manufacturing sector, often referred to as foundry services, ranking as the second-largest provider globally, just behind Taiwan Semiconductor Manufacturing Company (TSMC). While Samsung has notable clients such as Tesla and Qualcomm, TSMC counts industry giants like Apple and Nvidia among its customers. This announcement coincides with a challenging period for Samsung, as it faces stiff competition in the race to develop artificial intelligence chips, impacting both its profits and stock value. Analysts have indicated that Samsung is losing ground to TSMC in contract manufacturing, primarily due to technological hurdles in advancing its chip production capabilities, as reported by Reuters. In the face of these challenges, Samsung is gearing up for its earnings call on Thursday, where projections suggest the company’s second-quarter profits may drop by more than half, as highlighted by CNBC.