Robust AI Demand Bolsters Samsung’s Memory Chip Outlook
Amidst a competitive landscape, Samsung Electronics has emerged with a positive forecast, attributing the resilience of the artificial intelligence sector as a key driver for the sustained demand and tightening supply of high-end chips. This optimism is shared by industry rivals who are also witnessing a robust recovery in the global memory chip market.
The announcement of Samsung’s buoyant outlook coincided with a significant surge in its shares, which climbed by 1.8 percent following the disclosure of a substantial rise in first-quarter operating profit. Despite this uptick, Samsung’s shares have experienced a slight decline of 0.8 percent this year, trailing behind SK Hynix’s impressive 24 percent increase. Samsung is actively pursuing advancements to rival SK Hynix in the provision of top-tier chips, such as high bandwidth memory (HBM), to leading AI companies like Nvidia.
On the earnings call, Samsung Vice President Jaejune Kim revealed plans to triple the supply of HBM-related chips by 2024 compared to the previous year. The company has already initiated mass production of its latest HBM chips, the 8-layer HBM3E, designed for generative AI chipsets. With ambitions to dominate the AI-driven market surge that has favored SK Hynix, Samsung is also preparing to manufacture a 12-layer version in the second quarter, anticipating that these HBM3E products will constitute two-thirds of its HBM output by the end of the year.
Analysts have labeled Samsung’s goals as ambitious, noting that its 8-layer HBM3E is likely supplying Nvidia, while the forthcoming 12-layer could be destined for both AMD and Nvidia. Jeff Kim from KB Securities highlighted Samsung’s technological edge in high-stacking, suggesting a potential market segmentation with Nvidia sourcing 12-layer products from Samsung and predominantly 8-layer products from SK Hynix.
In addition to its HBM efforts, Samsung is also ramping up its high-end solid-state drive (SSD) offerings to cater to AI server demands. The company expects a tightening supply of high-end memory chips towards the year’s end as focus shifts towards HBM production—a sentiment echoed by SK Hynix.
The positive turn in the memory chips segment is reflected in Samsung’s first-quarter revenue, which saw a 13 percent increase, bolstered by a 96 percent rise in memory chip revenue. This revenue spike was fueled by steep price increases resulting from an AI boom and a rebound from a previous downturn. The chip division, traditionally a significant profit generator for Samsung, reported a profit for the first time since the third quarter of 2022.
Despite rising costs impacting margins on its flagship Galaxy S24 smartphones, Samsung noted that AI features were a driving factor behind sales, with a significant portion of customers purchasing and regularly using these AI functionalities.
