Samsung Electronics is predicting strong demand for artificial intelligence and is tightening the supply of high-end chips as a result. The company reported a more than 10-fold rise in first-quarter operating profit, causing its shares to increase by 1.8%. Despite this positive outlook, Samsung’s shares have lagged behind SK Hynix’s gains as it tries to catch up with its smaller rival in the supply of high-end chips to AI leader Nvidia.
Samsung plans to increase the supply of HBM-related chips by more than three-fold in 2024 compared to last year. The company recently began mass-producing the latest HBM chips for generative AI chipsets, starting with the 8-layer HBM3E, with plans to introduce a 12-layer version in the second quarter. Analysts believe that Samsung’s aggressive targets for HBM production may be beneficial to companies like Nvidia and AMD.
Samsung is focusing on improving its high-stacking technology to supply Nvidia with 12-layer products, while SK Hynix is expected to supply most 8-layer products to Nvidia. The company is also working on improving the yield of its 12-layer product. Samsung plans to enhance its offerings of high-end solid-state drive (SSD) products to meet AI server demand and expects high-end memory chip supply to tighten towards the end of the year due to capacity being focused on HBM chips.
In the first quarter, Samsung’s revenue increased by 13%, including a significant increase in memory chip revenue thanks to the AI boom. Operating profit also substantially rose compared to the previous year, marking the highest profit since the third quarter of 2022. The chip division, which used to account for two-thirds of Samsung’s operating profit, swung to a profit in the March quarter after facing losses the previous year.
Samsung’s mobile devices business saw a slight decrease in operating profit in the first quarter, despite shipping about 60 million smartphones. The company regained its title as the world’s top smartphone vendor from Apple, as Apple faced a sales decline in China. Rising costs, including increased memory chip prices, impacted the margins of flagship Galaxy S24 smartphones. However, Samsung noted that AI functions were driving sales of the S24 phones and contributing to the division’s double-digit profitability in the first quarter.
Overall, Samsung Electronics is optimistic about the strong demand for artificial intelligence and is taking steps to tighten the supply of high-end chips to meet this demand. The company’s aggressive targets for HBM chip production and improvements in high-stacking technology are expected to benefit customers like Nvidia and AMD. Samsung’s focus on high-end solid-state drive products and expectations for tightening memory chip supply towards the end of the year demonstrate the company’s commitment to capitalizing on the AI boom and rebounding global memory chip market.
