Samsung Expects AI to Drive Technology Demand in Second Half Following Strong Q1
Samsung Electronics forecasts strong demand for AI technology in the second half of the year. The company plans to increase the supply of high-end chips, particularly HBM chips. Samsung has begun mass production of the latest HBM chips and aims to capitalise on the AI boom.
The company anticipates that this demand will lead to a tightening supply of high-end chips, signaling a positive outlook for the global memory chip market.
Following the announcement, Samsung's shares rose by 1.8% on Tuesday, buoyed by the news of a more than 10-fold increase in first-quarter operating profit. However, the company's shares have experienced a slight decline of 0.8% this year, lagging behind its competitor SK Hynix, which has seen a 24% gain. Samsung aims to catch up with SK Hynix in the supply of top-end chips, particularly high bandwidth memory (HBM) chips used by AI leader Nvidia.
Jaejune Kim, a Samsung vice president in charge of the memory division, stated during an earnings call that the company plans to increase the supply of HBM-related chips by more than three-fold compared to last year. Samsung has already begun mass production of the latest HBM chips, called 8-layer HBM3E, which are designed for use in generative AI chipsets. The company intends to capitalise on the AI boom that has benefited SK Hynix, the previous sole supplier of HBM3 chips to Nvidia.
Samsung's aggressive targets include starting the production of the 12-layer version of HBM chips in the second quarter. The company expects the latest HBM3E products to account for two-thirds of its HBM output by the end of the year. Analysts have noted that Samsung's 8-layer HBM3E chips appear to be supplying Nvidia, while the 12-layer version may be allocated to both AMD and Nvidia.
Samsung's focus on improving the yield of its 12-layer product reflects its commitment to meeting the growing demand for high-end memory chips. The company also plans to increase its offerings of high-end solid-state drive (SSD) products to meet the demand for AI servers. As a result, the supply of high-end memory chips is expected to become tighter towards the end of the year, aligning with comments made by SK Hynix last week.
In the first quarter, Samsung reported a 13% increase in revenue to 71.9 trillion won ($52.14 billion), with memory chip revenue experiencing a significant 96% increase to 17.49 trillion won. This surge in revenue can be attributed to the steep rise in chip prices, driven by the AI boom. Operating profit also rose to 6.6 trillion won, marking the company's highest operating profit since the third quarter of 2022.
The chip division, which historically accounted for two-thirds of Samsung's operating profit, returned to profitability in the first quarter, recording a profit of 1.91 trillion won compared to a loss of 4.58 trillion won in the same period last year. The increase in prices of NAND flash chips and DRAM chips further contributed to the division's positive performance.
While Samsung's mobile devices business reported a slight decline in operating profit to 3.51 trillion won, the company shipped approximately 60 million smartphones during the quarter, reclaiming its position as the world's top smartphone vendor from Apple. The incorporation of AI functions in Samsung's S24 phones played a significant role in driving sales, with 50% of customers citing AI as a reason for their purchase and 60% regularly using the AI functions.
Samsung Electronics forecasts strong demand for AI technology in the second half of the year.
The company plans to increase the supply of high-end chips, particularly HBM chips.
Samsung has begun mass production of the latest HBM chips and aims to capitalise on the AI boom.
Source: REUTERS