Samsung Electronics predicted that demand for artificial intelligence would remain high. Additionally, it forecasted a tightening of supply for some high-end chips, aligning with its competitors’ expectations. This will help the battered global memory chip industry to recover steadily.
On Tuesday, the world’s largest memory chip manufacturer announced a more than 10-fold increase in first-quarter operating profit. This optimistic outlook caused its shares to gain 1.8%.
While attempting to catch up to its smaller rival in supplying top-tier semiconductors like high bandwidth memory (HBM) to AI leader Nvidia, Samsung shares have decreased 0.8% so far this year. In contrast, SK Hynix’s shares have increased by 24%.
During an earnings call, Samsung vice president in charge of the memory division Jaejune Kim stated, “We plan to increase supply of HBM-related chips in 2024 by more than three-fold versus last year.”
According to Samsung, mass manufacture of the newest HBM chips—the 8-layer HBM3E—for use in generative AI chipsets started this month. It is attempting to profit from the AI boom that has helped SK Hynix, which was Nvidia’s only source of HBM3 processors.
Samsung states that the 12-layer version will begin production in the second quarter. Additionally, by the end of the year, the company anticipates HBM3E devices to constitute two-thirds of its total HBM output.
The aims, according to analysts, were aggressive.
Jeff Kim, head of research at KB Securities, states that Nvidia seems to be receiving Samsung’s 8-layer HBM3E. Meanwhile, both AMD and Nvidia may receive the 12-layer.
“As Samsung’s technology is advantageous for high-stacking, while SK Hynix has its advantages in the 8-layer, there may be a segmentation where Nvidia gets 12-layer products from Samsung and most 8-layer products from SK Hynix,” Kim stated.
“Samsung is working hard to improve the yield of its 12-layer product.”
Samsung did not immediately respond to a request for comment regarding its HBM customers.
Samsung is boosting its high-end solid-state drive (SSD) product offerings to match the demand from AI servers. Additionally, it expects the supply of high-end memory chips to tighten towards year-end due to capacity being allocated to HBM, reiterating remarks made by SK Hynix last week.
PROFIT FROM MEMORY CHIPS
Prices rose sharply from a severe downturn, partially due to the surge in AI. The South Korean company’s first-quarter sales increased 13% to 71.9 trillion won ($52.14 billion). This included a 96% gain in memory chip revenue to 17.49 trillion won.
From January to March of this year, operating profit increased to 6.6 trillion won from 640 billion won the previous year. The operating profit for the corporation reached its highest point since the third quarter of 2022.
Historically, Samsung’s cash cow industry, the chip division, accounted for two thirds of its operating profit. However, a year earlier, the division lost 4.58 trillion won, but in the March quarter, it made 1.91 trillion won. It was the company’s first profit since 2022’s third quarter.
Data provider TrendForce reports that the cost of DRAM chips, used in tech gadgets, rose by roughly 20% during the first quarter compared to the previous quarter. Meanwhile, the cost of NAND flash chips, used to store data, increased by 23% to 28%.
In the first quarter, Samsung’s mobile device division recorded an operating profit of 3.51 trillion won. This figure marks a decrease from the 3.94 trillion won reported in the same period last year.
Shipping over 60 million handsets during the quarter, Samsung regained its position as the world’s top smartphone provider from Apple. This occurred in line with a year earlier, as Apple experienced a decline in sales in China.
Rising expenses, like higher memory chip prices, hurt the company’s profit margins on the quarter’s top Galaxy S24 handsets.
According to Samsung, sales of S24 phones were driven by AI functionalities. This helped the company sustain double-digit profitability in the first quarter. The business reports that about 50% of users claimed to have purchased S24 phones specifically for the AI features. Additionally, 60% of them used the features on a daily basis.
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