Samsung says AI will drive demand for the technology in the second half followed by the first quarter of 2024

Samsung Electronics estimates demand for artificial intelligence will remain strong and supply of some high-end chips will remain tight, allowing rivals to benefit from a solid rebound in the battered global memory chip market.

The world’s largest memory chip maker’s upbeat outlook sent its shares rising 1.8 per cent on Tuesday after it reported a more than 10-fold rise in first-quarter operating profit.

But Samsung shares have fallen 0.8 percent so far this year, lagging SK Hynix’s 24 percent gain, as it outpaces its smaller rival in supplying top-end chips such as high-bandwidth memory (HBM) to AI leader Nvidia. Trying to catch up with.

“We plan to increase the supply of HBM-related chips in 2024 by more than three times compared with last year,” Jaejun Kim, Samsung’s vice president in charge of the memory division, said on an earnings call.

Samsung said this month it began mass production of the latest HBM chips, called the 8-layer HBM3E, for use in generic AI chipsets. It is trying to capitalize on the AI ​​boom that has benefited SK Hynix, which was the sole supplier of HBM3 chips to Nvidia.

Samsung said it planned to start making the 12-layer version during the second quarter, and expected the latest HBM3E products to account for two-thirds of its HBM output by the end of the year.

Analysts said the targets were aggressive.

It appears Samsung’s 8-layer HBM3E is being supplied to Nvidia, while the 12-layer may go to AMD and Nvidia, said Jeff Kim, head of research at KB Securities.

“Since Samsung’s technology is advantageous for high-stacking, while SK Hynix has advantages in 8-layer, there could be a segmentation where Nvidia gets most of the 12-layer products from Samsung and most of the 8-layer products from SK Hynix Are,” Kim said. ,

“Samsung is working hard to improve the yield of its 12-layer product.”

Samsung did not immediately respond to a request for comment from its HBM customers.

Samsung also said it will increase its offering of high-end solid-state drive (SSD) products to meet demand for AI servers, and expects to expand its offerings to high-end SSDs by the end of the year due to its ability to focus on HBM. And the supply of memory chips will become tight. Comments from SK Hynix last week.

memory chip benefits

The South Korean company’s first-quarter revenue rose 13 percent to KRW 71.9 trillion ($52.14 billion), driven by a 96 percent surge in memory chip revenue to KRW 17.49 trillion, as prices rose sharply after a sharp decline. That happened, partly thanks to the surge in AI.

Operating profit rose to KRW 6.6 trillion in January-March from KRW 640 billion a year earlier. This was the company’s highest operating profit since the third quarter of 2022.

The chip division, historically Samsung’s cash cow business that accounts for two-thirds of its operating profit, swung to a profit of KRW 1.91 trillion in the March quarter from a loss of KRW 4.58 trillion a year earlier. It was the first profit since the third quarter of 2022.

According to data provider TrendForce, prices for NAND flash chips used to store data rose 23 percent to 28 percent during the first quarter compared with the previous quarter, while those for DRAM chips used in technology devices. Prices increased by about 20 percent.

Samsung’s mobile device business reported KRW 3.51 trillion operating profit in the first quarter, down from KRW 3.94 trillion a year earlier.

It sold nearly 60 million smartphones during the quarter, up from a year earlier, but took back the title of world’s top smartphone seller from Apple, which is facing declining sales in China.

Rising costs, including increased memory chip prices, impacted margins for the flagship Galaxy S24 smartphone launched during the quarter.

Samsung said AI functions were driving sales of the S24 phones, helping the division maintain double-digit profitability in the first quarter. The company said that about 50 percent of customers said they purchased S24 phones for AI functions and 60 percent were using AI functions regularly.

© Thomson Reuters 2024