Samsung Electronics profits rise on demand for AI memory chips

smallEx-Korean billionaire Jay Y. Lee’s Samsung Electronics saw its revenue and profit soar in the second quarter as demand intensified for memory chips that power servers and AI cores.

Operating profit rose 1,458 percent year-on-year to 10.4 trillion won (about $7.6 billion), while revenue rose 23 percent year-on-year to 74 trillion won, Samsung said Wednesday. Shares of the tech giant closed up 3.58% on Wednesday.

Samsung generated 21.7 trillion won from memory chip sales, up 142% year-on-year – accounting for 30% of its total revenue. The electronics giant attributed the jump to “favorable memory market conditions,” which boosted average selling prices. Key among these chips are high-bandwidth memory (HBM) chips, which use vertically stacked chips to support higher processing speeds while consuming less power. HBM chips are a critical component of Nvidia’s GPUs, which help power AI services like ChatGPT.

“In the second half of 2024, AI servers are expected to capture a larger share of the market as major cloud service providers and enterprises expand their AI investments,” the company added in a statement. Demand for these AI servers, which are equipped with HBM chips, is expected to “remain strong,” tied to continued AI investments by both cloud service providers and enterprises using on-premise servers. Earlier this week, tech giants Alphabet and Microsoft announced they would increase capital spending to capitalize on advances in artificial intelligence, with Alphabet spending up 90% year-on-year to $13 billion.

In the global HBM market, Samsung faces stiff competition from Korean billionaire Chey Tae-won’s SK Hynix, the memory chip arm of SK Group. SK Hynix controls more than 90% of the market for HBM3 chips, a type of advanced HBM chip, according to market research firm TrendForce. In March, SK Hynix began production of the world’s most advanced HBM chips, the HBM3e, which the company claims can process data at up to 1.15 terabytes per second – about 25% faster than its predecessor, the HBM3 .

Samsung has yet to receive approval for its HBM chips from Nvidia, the dominant AI chip supplier. In March, billionaire Jensen Huang, co-founder and CEO of Nvidia, reportedly expressed interest in Samsung’s HBM chips, a moment that went viral from a photo of Huang’s signature and the word “approved” on a prototype of its HBM3e Samsung. Just two months later, in May, Samsung’s HBM chips According to reports failed several critical heat and power consumption tests. Earlier this month, Nvidia cleared Samsung’s HBM3 chips for use in China, Reuters mentiontedciting sources.

Growing demand for HBM chips has benefited other semiconductor giants, such as equipment maker Hanmi Semiconductor. The company’s founder and chief executive, Kwak Dong Shin, became a billionaire last April, joining the ranks of Korea’s 50 richest after the AI ​​boom sent his company’s shares soaring 600% in the past year. Hanmi offers its customers, including SK Hynix and Micron Technology, processing equipment for HBM chip stacking, bonding and inspection.

Samsung also operates a foundry, or contract chip manufacturing service, which the company says will “continue to expand orders” for artificial intelligence and high-performance computing. In June, the company announced that its 4-nanometer process will begin mass production next year. This 4-nanometer process will be used in Samsung’s cutting-edge HBM chips as part of the company’s bid for HBM dominance, according to local media.

The chips Samsung produces in its foundry are used to power its smartphones. The Exynos 2400 chipset, for example, is used in the Galaxy S24 flagship phones, which were launched in January. The Exynos 2400 allows these phones to leverage Google’s genetic AI technology, with features like real-time voice call translation and a search tool that lets users draw a circle over any image to search for relevant information. While revenue for Samsung’s smartphone business fell to 27.38 trillion won, which Samsung attributed to “seasonal trends,” the company said it expects overall demand for mobile phones to increase year-on-year.

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