Samsung is rising after signaling progress with Nvidia in AI memory
Samsung Electronics Co. declared progress in delivering its most advanced AI memory chips to Nvidia Corp., providing some reassurance to investors who fear the company will fall further behind SK Hynix Inc. in a red hot market.
Samsung shares rose as much as 3.6% after an executive told analysts the company has made “meaningful” progress in key stages of the qualification process with a major customer, referring to Nvidia. The Korean company now expects to sell its most advanced, highest-margin HBM3E chips in the fourth quarter, Jaejune Kim, executive vice president of Samsung’s memory business, said during an earnings call Thursday. SK Hynix shares fell as much as 4.6%.
The once dominant memory maker is struggling to get its latest chips certified by Nvidia for use with AI accelerators. SK Hynix and Micron Technology Inc. provided an unusually long period to acquire industry leaders in the lucrative high-bandwidth memory field.
South Korea’s largest company has so far missed out on the lion’s share of profits due to rising demand for artificial intelligence. The company also remains exposed to weak mobile chip sales even as it faces a rising supply of older chips in the Chinese market. Demand for its smartphone chips is expected to remain weak next year, executives said.
“The key question is whether Samsung will be able to secure meaningful market share from Nvidia even if it becomes another supplier after SK Hynix,” said Greg Roh, an analyst at Hyundai Motor Securities Co. “We have to wait and see.”
Profits at Samsung’s key semiconductor business fell short of market expectations, reflecting the Korean technology leader’s struggle to catch up to HBM and turn around its foundry business. The semiconductor division – usually the biggest profit contributor – posted only 3.86 trillion won ($2.8 billion) in operating profit in the September quarter, below the estimate of 6.66 trillion won.
That’s because SK Hynix posted a record operating profit of 7.03 trillion won last week with plans to deliver its 12-layer HMB3E in the current quarter.
Samsung is now cutting production of its old memory in an effort to speed up conversion to advanced manufacturing processes, Kim said. The memory-related capital expenditures will prioritize high-end products, he said. Chip-related capital expenditures are expected to total 47.9 trillion won this year, and Samsung now expects to begin large-scale production of the next generation of HBM4 chips in the second half of next year.
Samsung, which has lost about a quarter of its value this year, still reported net profit of 9.78 trillion won, beating the average analyst estimate of 9.14 trillion won, as other parts of the company’s sprawling business company helped offset its chip activities.
The win came three weeks after Jun Young-hyun, head of Samsung’s chip division, apologized for disappointing results and acknowledged delays in gaining certification for its most advanced chip range. Samsung had predicted in July that they would start mass production in the third quarter.
Samsung must now overhaul its organizational culture and processes, Jun had said – echoing previous comments about the need for fundamental change at one of Korea’s oldest companies. Workers have begun to be laid off in Southeast Asia, Australia and New Zealand as part of a plan to cut the global workforce by thousands of jobs, Bloomberg News reported.
What Bloomberg Intelligence Says Samsung Electronics’ 2% sequential revenue growth for Q3 announced today suggests that 4Q revenue growth may lag that of SK Hynix, which delivered 7% sequential revenue growth in Q3. SK Hynix could keep its lead for a while, although Samsung will try to catch up in high-bandwidth memory chips (HBM) for artificial intelligence servers.
– Masahiro Wakasugi and Takumi Okano, analysts
In addition to SK Hynix lagging behind in HBM, Samsung also showed little progress against Taiwan Semiconductor Manufacturing Co. in the outsourced production of custom chips. Full-year foundry capital expenditure is expected to decline from last year, the company said, although it plans to modernize its mature production lines. Chipmakers are fighting to secure capacity at TSMC, the main chipmaker of both Apple Inc. like Nvidia.
The global foundry market is expected to grow by double digits next year, Samsung said. The company aims to increase sales by improving returns on its advanced lines, the company said.
Despite difficulties in its semiconductor unit, Samsung’s bottom line was boosted by the launch of its new smartphones, tablets and wearables, where profitability rose despite high material costs. Samsung said it expects the overall smartphone market to grow sequentially in the current quarter, driving sales of its flagship products, although it expects growing competition in the mid-range segment to weigh on the number of smartphones sold and the average selling price.
But the company sees more competition in the TV market even as it tries to reposition TVs as AI hubs in homes.
© 2024 BloombergLP
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
