SEOUL - Samsung Electronics forecast demand for artificial intelligence (AI) would hold strong and tighten supply of some high-end chips, joining rivals in benefiting from a solid rebound in the battered global memory chip market.
The upbeat outlook from the world’s largest memory chipmaker sent its shares 1.8 per cent higher on April 30 after it reported a more than tenfold rise in first-quarter operating profit.
But so far in 2024, Samsung shares are down 0.8 per cent, lagging SK Hynix’s 24 per cent gain, as it seeks to catch up with its smaller rival in the supply of top-end chips such as high bandwidth memory (HBM) to AI leader Nvidia.
“We plan to increase supply of HBM-related chips in 2024 by more than threefold versus 2023,” Samsung vice-president in charge of the memory division Jaejune Kim said on an earnings call.
Samsung said it began mass production in April of the latest HBM chips for use in generative AI chipsets, called eight-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 the second quarter 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 eight-layer HBM3E appears to be supplying Nvidia, while the 12-layer may go to AMD and Nvidia, said Mr Jeff Kim, head of research at KB Securities.
Samsung said it will step up offerings of high-end solid-state drive products to meet AI server demand and expected high-end memory chip supply to become tighter towards year-end due to capacity being focused on HBM, echoing comments from SK Hynix.
Memory chip profit
The South Korean company’s first-quarter revenue rose 13 per cent to 71.9 trillion won (S$71 billion), including a 96 per cent increase in memory chip revenue to 17.49 trillion won as prices rose steeply from a severe downturn, partly thanks to the boom in AI.
Operating profit rose to 6.6 trillion won in January to March, up from 640 billion won a year earlier. It was the company’s highest operating profit since the third quarter of 2022.
The chip division, historically Samsung’s cash cow business that used to account for two-thirds of its operating profit, swung to a profit of 1.91 trillion won in the March quarter from a 4.58 trillion won loss a year earlier. It was the first profit since the third quarter of 2022.
Prices of Nand flash chips used to store data increased by 23 per cent to 28 per cent during the first quarter versus the previous quarter, while prices of Dram chips used in tech devices rose by about 20 per cent, according to data provider TrendForce.
Samsung’s mobile devices business booked a 3.51 trillion won operating profit in the first quarter, down from 3.94 trillion won a year earlier.
It shipped about 60 million smartphones during the quarter, in line with a year earlier but retaking its title as the world’s top smartphone vendor from Apple, which is suffering a sales decline in China.
Rising costs, including increased memory chip prices, dented margins from its flagship Galaxy S24 smartphones launched during the quarter.
Samsung said AI functions were driving sales of S24 phones, allowing the division to maintain double-digit profitability in the first quarter. About 50 per cent of customers said they bought S24 phones for the AI functions and 60 per cent were regularly using the AI functions. REUTERS
