Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Samsung says AI to drive technology demand in second half after strong Q1

Published 2024-04-29, 11:43 p/m
© Reuters. Samsung signage is seen in a store in Manhattan, New York City, U.S., November 22, 2021. REUTERS/Andrew Kelly/File Photo
NVDA
-
AMD
-
000660
-
005930
-

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) -Samsung Electronics forecast demand for artificial intelligence 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 chip maker sent its shares 1.8% higher on Tuesday after it reported a more than 10-fold rise in first-quarter operating profit.

But so far this year Samsung (KS:005930) shares are down 0.8%, lagging SK Hynix's 24% 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 (NASDAQ:NVDA).

"We plan to increase supply of HBM-related chips in 2024 by more than three-fold versus last year," Jaejune Kim, a Samsung vice president 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 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 8-layer HBM3E appears to be supplying Nvidia, while the 12-layer may go to AMD (NASDAQ:AMD) and Nvidia, said 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," Kim said.

"Samsung is working hard to improve the yield of its 12-layer product."

Samsung did not respond immediately to a request for comment on its HBM customers.

Samsung also said it will step up offerings of high-end solid-state drive (SSD) products to meet AI server demand, and expected high-end memory chip supply to become tighter toward year-end due to capacity being focused on HBM, echoing comments from SK Hynix last week.

MEMORY CHIP PROFIT

The South Korean company's first-quarter revenue 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 steeply from a severe downturn, partly thanks to the boom in AI.

Operating profit rose to 6.6 trillion won in January-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% to 28% during the first quarter versus the previous quarter, while prices of DRAM chips used in tech devices rose by about 20%, 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 (NASDAQ:AAPL), 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.

© Reuters. Samsung signage is seen in a store in Manhattan, New York City, U.S., November 22, 2021. REUTERS/Andrew Kelly/File Photo

Samsung said AI functions were driving sales of S24 phones, allowing the division to maintain double-digit profitability in the first quarter. About 50% of customers said they bought S24 phones for the AI functions, and 60% were regularly using the AI functions, the company said.

($1 = 1,374.1900 won)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.