* Memory chip shortage to continue to drive demand,

executive says

* Samsung shares have hit record highs this year, up as

much as 6.5% on Wednesday

* Top executive vows to narrow wage gap with rivals

(Add executive comments)

By Heekyong Yang and Hyunjoo Jin

SUWON, South Korea, March 18 (Reuters) - Samsung

Electronics ( SSNLF ) sees strong demand for chips continuing

this year, driven by the artificial intelligence wave, but

rising memory chip prices could hit computer and mobile

shipments, its top executive said on Wednesday.

Co-CEO Jun Young-hyun said it is working with key customers

to shift from traditional annual or quarterly supply agreements

to multi-year contracts of three-to-five years to mitigate the

effects of cyclical demand fluctuations.

Many shareholders management after share prices and earnings

hit a record high, a dramatic turnaround from last year when its

management apologised for lagging rivals in the AI race.

He said Samsung was now a key partner with Nvidia ( NVDA )

in AI infrastructure, citing Nvidia's ( NVDA ) GTC conference where CEO

Jensen Huang announced a foundry partnership with the Korean

firm and praised its HBM4 chips.

Jun said the industry is entering an "unprecedented

supercycle," driven by growing investment in AI infrastructure.

But he was wary of market concerns about an AI bubble, while

saying power supply constraints were also a major bottleneck for

AI datacentres.

"We expect a favourable business environment due to the

increasing demand for AI and the resulting continued shortage of

memory supply," Jun, 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.

MAJOR TURNAROUND

Bottlenecks in global semiconductor supply stemming from

robust demand for AI datacentres have curbed memory chip supply

to industries from cars and computers to smartphones.

Samsung shares skyrocketed to record highs this year and are

up 62% since January, outperforming the wider 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 traditional chip

prices surging and Samsung narrowing the gap with SK Hynix in

the race to develop high bandwidth memory, or HBM, chips.

"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 rivals on wage

competitiveness as sluggish chip earnings hit 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.