Samsung says demand for AI would hold strong in second half

Samsung said it began mass production this month of the latest HBM chips for use in generative AI chipsets, called 8-layer HBM3E

Samsung Electronics forecast demand for AI would hold strong and tighten supply of some high-end chips, joining rivals in benefiting from a solid bounce back in the battered global memory chip market.

The upbeat outlook from the world’s biggest memory chip maker sent its shares up 1.8% on Tuesday after it reported a more than 10-fold increase in first-quarter operating profit.

But so far this year Samsung shares are 0.8% lower, lagging SK Hynix’s 24% gain, as it seeks to catch up with its smaller rival in the supply of top-end chips like high bandwidth memory (HBM) to AI company Nvidia.

We plan to increase supply of HBM-related chips in 2024 by more than three-fold versus last year, Jaejune Kim, a Samsung VP in charge of the memory division, said on an earnings call.

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

Samsung said it planned to start making the 12-layer version during Q2, and expected the latest HBM3E products to account for two-thirds of its HBM output by year-end.

Analysts said the targets were aggressive.

Samsung’s 8-layer HBM3E seems to be supplying Nvidia, while the 12-layer may go to AMD and Nvidia, according to Jeff Kim, head of research at KB Securities.

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, he added.

He said: Samsung is working hard to improve the yield of its 12-layer product.

The South Korean firm’s Q1 revenue rose 13% to 71.9 trillion won ($52.14 billion), including a 96% rise in memory chip revenue to 17.49 trillion won as prices increased sharply from a severe downturn, partly thanks to the boom in artificial intelligence.

Operating profit increased to 6.6 trillion won in January-March, up from 640 billion won a year earlier. It was the firm’s highest operating profit since Q3 2022.