A Samsung Electronics Co. 12-layer HBM3E, prime, and different DDR modules organized in Seoul, South Korea, on Thursday, April 4, 2024.
SeongJoon Cho | Bloomberg | Getty Pictures
Samsung Electronics was as soon as the dominant participant in a kind of semiconductor often known as reminiscence, placing it in an incredible place to capitalize on the increase of synthetic intelligence.
However the South Korea electronics large has now fallen behind its long-time rival SK Hynix in next-generation chips which were key element for AI silicon chief Nvidia. The outcome? Samsung’s revenue has plunged, round $126 billion has been wiped off its market worth, based on knowledge from S&P Capital IQ, and an govt issued a uncommon public apology in regards to the firm’s current monetary efficiency.
Reminiscence is a important sort of chip used to retailer knowledge, and it may be present in a plethora of gadgets from smartphones to laptops. For years, Samsung was the plain chief on this know-how, forward of South Korean rival SK Hynix and U.S. competitor Micron.
However as AI purposes corresponding to OpenAI’s ChatGPT rose in recognition, the underlying infrastructure required to coach the large fashions they depend on grew to become an even bigger focus. Nvidia has emerged as the highest participant on this area with its graphics processing items (GPUs) which have grow to be the gold commonplace utilized by tech giants for AI coaching.
An important a part of that semiconductor structure is high-bandwidth reminiscence, or HBM. This subsequent era of reminiscence entails stacking a number of dynamic random entry reminiscence (DRAM) chips, nevertheless it had a small market earlier than the AI increase.
That is the place Samsung obtained caught out and failed to speculate.
“HBM has been a really area of interest product … for a very long time and Samsung has not targeted its sources on its improvement,” Kazunori Ito, director of fairness analysis at Morningstar, instructed CNBC by electronic mail.
“As a result of problem of the know-how concerned in stacking DRAMs and the small measurement of the addressable market, it was believed that the excessive improvement prices weren’t justified.”
SK Hynix noticed this chance. The corporate aggressively launched HBM chips which had been accepted to be used in Nvidia structure and, within the course of, the South Korean agency established a detailed relationship with the U.S. large. Nvidia’s CEO even requested the corporate to hurry up provide of its subsequent era chip, underscoring the significance of HBM to its merchandise.
SK Hynix posted file quarterly working revenue within the September quarter.
“With sturdy R&D (analysis and improvement) investments and established trade partnerships, SK Hynix maintains an edge in each HBM innovation and market penetration,” Brady Wang, related director at Counterpoint Analysis, instructed CNBC by electronic mail.
Samsung instructed CNBC that, within the third quarter, whole HBM gross sales grew greater than 70% quarter-on-quarter. The tech large added that the present product often known as HBM3E is in mass manufacturing and producing gross sales.
The South Korean tech firm famous that improvement for its next-generation HBM4 is “underway based on plan” and that the corporate is focusing on beginning “mass manufacturing” within the second half of 2025.
Can Samsung make a comeback?
Analysts stated that Samsung is lagging behind opponents for quite a lot of causes, together with underinvestment in HBM and the truth that it isn’t a first-mover.
“It’s honest to say that Samsung has not been in a position to shut the hole with SK Hynix on the HBM improvement roadmap,” Morningstar’s Ito stated.
Samsung’s skill to make a comeback within the brief time period seems to be carefully linked to Nvidia.
An organization should cross a strict qualification course of earlier than Nvidia approves it as a HBM provider — and Samsung has not but accomplished this verification. However a inexperienced mild from Nvidia may open the door for Samsung to return to development and compete extra successfully with SK Hynix, based on analysts.
“Since NVIDIA holds greater than 90% of the AI chip market, the place most HBMs are used, NVIDIA’s approval is important for Samsung to profit from the strong demand for AI servers,” Ito stated.
A Samsung spokesperson stated that the corporate has made “that means progress” concerning HBM3E and has “accomplished an necessary part within the qualification course of.”
“We anticipate to begin increasing gross sales within the fourth quarter,” the spokesperson stated.
In the meantime, Wang famous that Samsung’s energy in analysis and improvement, in addition to the corporate’s semiconductor manufacturing capability that would assist it catch as much as SK Hynix.
