Samsung Expects AI To Grow In The Second Half Of The Year After a Strong Q1

(CTN News) – In the battered global memory chip market, Samsung Electronics sees demand for artificial intelligence holding steady and tightening supply of some high-end chips.

Memory chip maker’s shares rose 1.8% after it reported a more than 10-fold increase in first-quarter operating profit on Tuesday.

As Samsung tries to catch up with its smaller rival in supplying top-end chips such as high bandwidth memory (HBM) to AI leader NVIDIA, Samsung shares are down 0.8% so far this year.

HBM-related chips supply will increase three times in 2024, says Jaejune Kim, vice president of memory.

This month, started mass production of 8-layer HBM3E chips used in generative AI chipsets. NVIDIA’S SOLE SUPPLIER OF HBM3 chips, SK Hynix, HAS BENEFITED FROM THE AI BOOM.

It expects the latest HBM3E products to account for two-thirds of Samsung’s HBM output by year’s end.

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It’s an aggressive target, analysts say.

According to Jeff Kim, head of research at KB Securities, Nvidia will supply with its 8-layer HBM3E.

Nvidia may get 12-layer products from Samsung and most 8-layer products from SK Hynix because technology is good for high stacking, Kim said.

“Samsung is working hard to improve its 12-layer yield.”

Samsung didn’t respond to a request for comment right away.

According to Samsung, high-end solid-state drive (SSD) offerings will increase to meet AI server demand, and high-end memory chip supply will become tighter by year-end due to HBM being overtaken by SK Hynix.

OUR MEMORY CHIP PROFITS

Despite a severe downturn, company revenues rose 13% to 71.9 trillion won ($52.14 billion). Operating profit jumped from 640 billion won a year earlier to 6.6 trillion won in January-March. The company’s highest operating profit since the third quarter of 2022.

Historically, Samsung’s chip division accounted for two-thirds of its operating profit, but it swung to a profit of 1.91 trillion won in the March quarter from a loss of 4.58 trillion won the year before. The first profit since 2022.

NAND flash chips for storing data rose by 23% to 28% during the first quarter compared to last quarter, while DRAM chips jumped by 20%.

A year ago, Samsung’s mobile devices business had an operating profit of 3.94 trillion won.

Apple (AAPL.O), opens new tab, which is suffering a decline in sales in China, shipped about 60 million smartphones during the quarter.

Its flagship Galaxy S24 smartphones launched during the quarter saw margins shrink because of rising costs, including memory chip prices.

Samsung said AI functions drove sales of S24 phones, allowing it to maintain double-digit profitability in the first quarter. Half of customers said they bought S24 phones for the AI, and 60% used the AI regularly.

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