Samsung Electronics has landed a $16.5 billion contract to supply semiconductors to a large global company. However, the name of the company receiving the semiconductors is still under wraps. We expect more details about this contract to be revealed by the end of 2033. This is a major step forward for Samsung’s semiconductor production. We view this big contract as a significant positive change. It creates a solid income base for Samsung over the next decade. This steady income stream should reduce risks for the company’s stock, making it less safe for investors to take bearish positions, like short selling. Derivative traders should recognize this change as adding stability to Samsung’s value. Although we don’t know who the client is or what product will be supplied, this uncertainty may lead to an increase in short-term volatility. For us, this situation is an opportunity to sell out-of-the-money puts, taking advantage of the higher premiums that come with market jitters. This approach benefits from both the passage of time and the new support level created by the contract. The timing of this announcement is excellent. Samsung’s operating profit jumped over 900% year-on-year in the first quarter of 2024, mainly due to a recovery in the memory chip market. This new contract shows that the recovery is not temporary; it’s being bolstered by crucial long-term partnerships. We believe this supports a more optimistic long-term outlook. Looking back, when suppliers like TSMC secured long-term, high-volume orders from big clients like Apple, it often led to a sustained rise in its stock value over the years. We expect a similar trend for Samsung, providing ongoing support for its stock performance. The market may start to factor in this stable, high-margin revenue even before details emerge in 2033. The size of this deal strongly suggests that the end customer is likely a major cloud provider or tech giant working on custom silicon for artificial intelligence. Given that companies like Microsoft and Amazon are heavily investing in their AI chips to reduce reliance on a single supplier, this contract probably involves high-value, advanced logic chips. This positions Samsung as an essential partner in the ongoing AI competition.

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