Samsung Electronics Co.’s 12-layer HBM3E, top and other DDR modules are deployed on Thursday, April 4, 2024, in Seoul, South Korea.
Sung-jun Cho | Bloomberg | Getty Images
Samsung Electronics was once the dominant player in a type of semiconductor called memory, which put it well-positioned for the boom in artificial intelligence.
But the South Korean electronics giant now lags behind its long-time rival SK Hynix in next-generation chips, which have been a key component for the leader in artificial intelligence chips. NVIDIA. The result? According to S&P Capital IQ, Samsung’s profits have fallen sharply and its market value has been wiped out by about $126 billion, a senior executive said. rare public apology Regarding the company’s recent financial performance.
Memory is a key chip used to store data and can be found in numerous devices from smartphones to laptops. For years, Samsung was the undeniable leader in this technology, ahead of South Korean rivals SK Hynix and U.S. rivals Micron.
But as artificial intelligence applications such as OpenAI’s ChatGPT become more popular, the underlying infrastructure required to train the large models they rely on becomes a greater focus. Nvidia has become a top player in the field with its graphics processing units (GPUs), which have become the gold standard used by tech giants for artificial intelligence training.
A key part of this semiconductor architecture is high bandwidth memory (HBM). Next-generation memory involves stacking multiple dynamic random access memory (DRAM) dies, but it was a small market before the artificial intelligence boom.
This is where Samsung gets stuck and fails to invest.
Kazunori Ito, director of equity research at Morningstar, told CNBC via email: “HBM has always been a very niche product…Samsung has not focused resources on its development for a long time.”
“Due to the technical difficulty involved in stacking DRAM and the small size of the target market, the high development costs were not considered justified.”
SK hynix saw this opportunity. company Actively launch HBM chips The products have been approved for use on Nvidia architecture, and in the process the Korean company has developed a close relationship with the American giant. Nvidia’s CEO even Ask the company to speed up supply Its next-generation chips underscore HBM’s importance to its products.
Released by SK hynix Record quarterly operating profit in the September quarter.
Brady Wang, deputy director of Counterpoint Research, told CNBC via email: “With strong R&D investment and established industry partnerships, SK hynix maintains an advantage in HBM innovation and market penetration.”
Samsung told CNBC that total HBM sales increased by more than 70% in the third quarter compared with the previous quarter. The tech giant added that the product, now called HBM3E, has entered mass production and is generating sales.
The South Korean tech company noted that development of its next-generation HBM4 is “on track” and the company aims to start “volume production” in the second half of 2025.
Can Samsung make a comeback?
Analysts say Samsung is lagging behind rivals for a number of reasons, including underinvestment in HBM and the fact that it was not a first mover.
“It’s fair to say that Samsung has failed to close the gap with SK Hynix on the HBM development roadmap,” said Morningstar’s Ito.
Whether Samsung can make a comeback in the short term seems to be closely related to Nvidia.
A company must pass a rigorous qualification process before Nvidia will approve it as an HBM supplier, and Samsung has yet to complete this verification. But analysts said Nvidia’s approval could open the door for Samsung to resume growth and compete more effectively with SK Hynix.
“Since NVIDIA accounts for more than 90% of the AI chip market, where most HBMs are used, NVIDIA’s approval is crucial for Samsung to benefit from strong demand for AI servers,” Ito said.
A Samsung spokesperson said the company had made “meaningful progress” on HBM3E and “completed an important stage of the qualification process.”
“We expect to begin expanding sales in the fourth quarter,” the spokesman said.
At the same time, Wang pointed out that Samsung’s R&D strength as well as the company’s semiconductor manufacturing capabilities can help it catch up with SK Hynix.
