Samsung Electronics opens new tab predicts that AI demand would continue high and restrict the supply of certain high-end chips, allowing them to profit alongside competitors from a solid rebound in the shattered global memory chip sector.
On Tuesday, the world’s largest memory chip maker reported a more than 10-fold increase in first-quarter operating profit, sending its shares up 1.8%.
Samsung shares are down 0.8% this year, trailing SK Hynix’s, creating a new tab of 24% as it strives to catch up to its smaller rival in supplying high-end semiconductors like HBM to AI leader Nvidia (NVDA.O).
In an earnings call, Samsung memory division vice president Jaejune Kim said, “We plan to increase supply of HBM-related chips by more than three-fold versus last year.”
This month, Samsung began mass producing the 8-layer HBM3E HBM chip for generative AI chipsets. It wants to profit from the AI growth that aided SK Hynix, Nvidia’s lone HBM3 chip supplier.
Samsung anticipates HBM3E devices to account for two-thirds of its HBM output by the end of the year. Production of the 12-layer version will begin in the second quarter.
Analysts called the goals aggressive.
Jeff Kim, head of research at KB Securities, said Samsung’s 8-layer HBM3E may provide Nvidia, while the 12-layer may go to AMD (AMD.O), creating a new tab for Nvidia.
“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 said.
“Samsung is working hard to improve the yield of its 12-layer product.”
Samsung did not respond to an HBM customer comment request.
Samsung also increased its high-end solid-state drive (SSD) offerings to meet AI server demand and expects high-end memory chip supply to tighten toward year-end due to HBM capacity, reiterating SK Hynix’s comments last week.
The South Korean company’s first-quarter revenues rose 13% to 71.9 trillion won ($52.14 billion), including a 96% increase in memory chip revenue to 17.49 trillion won, as prices rose quickly from a severe drop due to AI.
Operating profit rose from 640 billion won to 6.6 trillion won in January–March. Operating profit for the company hit its highest level since Q3 2022.
Historically, Samsung’s chip segment generated two thirds of its operating profit. After losing 4.58 trillion won a year earlier, the division made 1.91 trillion won in the March quarter. Profit was the company’s first since 2022’s third quarter.
TrendForce reported that DRAM chips, used in electronic gadgets, rose 20% in the first quarter, while NAND flash chips, which store data, rose 23% to 28%.
Samsung’s mobile device division’s first-quarter operating profit was 3.51 trillion won, down from 3.94 trillion won last year.
It sold 60 million devices in the quarter, matching a year earlier, and recaptured its status as the world’s biggest smartphone vendor from Apple, which is suffering a drop in China sales.
The quarter’s top Galaxy S24 devices’ profit margins were affected by rising memory chip prices.
Samsung reported double-digit first-quarter profitability due to Galaxy S24 sales boosted by AI capabilities. The company reported that 50% of S24 users bought the phones for the AI features and 60% used them everyday.
