Samsung Says AI to Drive Know-how Demand in Second Half After Sturdy Q1 2024

Samsung Electronics forecast demand for artificial intelligence would maintain sturdy and tighten provide of some high-end chips, becoming a member of rivals in benefiting from a stable rebound within the battered international reminiscence chip market.

The upbeat outlook from the world’s largest reminiscence chip maker despatched its shares 1.8 % larger on Tuesday after it reported a greater than 10-fold rise in first-quarter working revenue.

However up to now this yr Samsung shares are down 0.8 %, lagging SK Hynix’s 24 % acquire, because it seeks to meet up with its smaller rival within the provide of top-end chips corresponding to excessive bandwidth reminiscence (HBM) to AI chief Nvidia.

“We plan to extend provide of HBM-related chips in 2024 by greater than three-fold versus final yr,” Jaejune Kim, a Samsung vp answerable for the reminiscence division, mentioned on an earnings name.

Samsung mentioned it started mass manufacturing this month of the newest HBM chips to be used in generative AI chipsets, referred to as 8-layer HBM3E. It’s looking for to capitalise on the AI increase that has benefited SK Hynix, which had been the only provider of HBM3 chips to Nvidia.

Samsung mentioned it deliberate to begin making the 12-layer model throughout the second quarter, and anticipated the newest HBM3E merchandise to account for two-thirds of its HBM output by year-end.

Analysts mentioned the targets had been aggressive.

Samsung’s 8-layer HBM3E seems to be supplying Nvidia, whereas the 12-layer could go to AMD and Nvidia, mentioned Jeff Kim, head of analysis at KB Securities.

“As Samsung’s expertise is advantageous for high-stacking, whereas SK Hynix has its benefits within the 8-layer, there could also be a segmentation the place Nvidia will get 12-layer merchandise from Samsung and most 8-layer merchandise from SK Hynix,” Kim mentioned.

“Samsung is working laborious to enhance the yield of its 12-layer product.”

Samsung didn’t reply instantly to a request for touch upon its HBM prospects.

Samsung additionally mentioned it should step up choices of high-end solid-state drive (SSD) merchandise to fulfill AI server demand, and anticipated high-end reminiscence chip provide to develop into tighter towards year-end on account of capability being centered on HBM, echoing feedback from SK Hynix final week.

Reminiscence chip revenue

The South Korean firm’s first-quarter income rose 13 % to KRW 71.9 trillion ($52.14 billion), together with a 96 % improve in reminiscence chip income to KRW 17.49 trillion as costs rose steeply from a extreme downturn, partly because of the increase in AI.

Working revenue rose to KRW 6.6 trillion in January-March, up from KRW 640 billion a yr earlier. It was the corporate’s highest working revenue because the third quarter of 2022.

The chip division, traditionally Samsung’s money cow enterprise that used to account for two-thirds of its working revenue, swung to a revenue of KRW 1.91 trillion within the March quarter from a KRW 4.58 trillion loss a yr earlier. It was the primary revenue because the third quarter of 2022.

Costs of NAND flash chips used to retailer information elevated by 23 % to twenty-eight % throughout the first quarter versus the earlier quarter, whereas costs of DRAM chips utilized in tech units rose by about 20 %, in keeping with information supplier TrendForce.

Samsung’s cell units enterprise booked a KRW 3.51 trillion working revenue within the first quarter, down from KRW 3.94 trillion a yr earlier.

It shipped about 60 million smartphones throughout the quarter, in keeping with a yr earlier however retaking its title because the world’s high smartphone vendor from Apple, which is struggling a gross sales decline in China.

Rising prices, together with elevated reminiscence chip costs, dented margins from its flagship Galaxy S24 smartphones launched throughout the quarter.

Samsung mentioned AI capabilities had been driving gross sales of S24 telephones, permitting the division to take care of double-digit profitability within the first quarter. About 50 % of consumers mentioned they purchased S24 telephones for the AI capabilities, and 60 % had been frequently utilizing the AI capabilities, the corporate mentioned.

© Thomson Reuters 2024

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