In line with competitors, Samsung Electronics (005930.KS) has opened a new tab and predicted that demand for AI will remain high, hence reducing the availability of some high-end semiconductors.
Following its announcement of a more than ten-fold increase in first-quarter operating profit, the world’s largest memory chip producer expressed optimism, which pushed its shares up 1.8% on Tuesday.
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However, while it tries to catch up to its smaller rival in the availability of top-end processors like high-speed memory (HBM) to artificial intelligence leader Nvidia (NVDA.O), Samsung shares are down 0.8% so far this year, trailing SK Hynix’s (000660.KS), opens a fresh tab 24% gain.
“During an earnings call, Jaejune Kim, a vice president at Samsung overseeing the memory division, stated that the company plans to increase the availability of HBM-related chips by more than three times compared to prior year.”
The 8-layer HBM3E chip, the newest HBM chip designed for generative AI chipsets, is being mass-produced by Samsung, the company announced. SK Hynix, the only company that supplied HBM3 chips to Nvidia, is hoping to profit from the AI revolution.
By the end of the year, two-thirds of Samsung’s HBM output is anticipated to come from its newest HBM3E products. The company announced that it will begin producing the 12-layer version in the second quarter.
The aims, according to analysts, were aggressive.
The chief analyst at KB Securities, Jeff Kim, stated that Nvidia appears to be receiving Samsung’s 8-layer HBM3E, while AMD (AMD.O) may receive the 12-layer, opens new tab.
“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.” A query on Samsung’s HBM clients was not immediately answered by Samsung.
Along with boosting its high-end solid-state drive (SSD) items to match the demand from AI servers, Samsung also noted that it expects the supply of high-end memory chips to tighten towards year-end as a result of capacity being allocated to HBM, reiterating remarks made by SK Hynix last week.
Profit From Memory Chips
With prices rising sharply from a prolonged slump, partially due to the surge in AI, the South Korean organization’s first-quarter sales increased 13% to 71.9 trillion dollars ($52.14 billion), particularly a 96% gain in chip memory sales to 17.49 trillion won.
The operating profit for the January-March period increased to 6.6 trillion won from 640 billion gained the previous year. That was the biggest operating profit the business has seen since 2022’s third quarter.
Once responsible for two-thirds of Samsung’s operating profit, the semiconductor division was the company’s cash cow. However, a year earlier, the division had lost 4.58 trillion won. However, in the March quarter, it made 1.91 trillion won. It was the company’s first profit since 2022’s third quarter.
In accordance with data provider TrendForce, the cost of DRAM chips, which are used in tech gadgets, climbed by roughly 20% during the initial quarter compared to the past quarter, while the cost of NAND flash chips, which are used to store data, jumped by 23% to 28%. The operating profit for Samsung’s mobile device division was 3.51 trillion won in the first quarter, compared to 3.94 trillion won in the same period last year.
In comparison to a year earlier, it delivered over 60 million handsets during the quarter, overtaking Apple (AAPL.O), opens fresh tab, which is seeing a dip in sales in China, to reclaim its position as the world’s top phone provider.
Rising expenses, like as higher memory chip prices, hurt the company’s profit margins on the quarter’s top Galaxy S24 handsets.
Sales of S24 phones, according to Samsung, were being driven by AI functionalities, which helped the company sustain double-digit profitability in its inaugural quarter. According to the business, about 50% of users claimed to have purchased S24 phones specifically for the AI features, and 60% of them used the features on a daily basis.
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