How Samsung fell behind in the AI boom leading to a $126 billion wipeout
SeongJoon Cho | Bloomberg | Getty Photos
Samsung Electronics used to be as soon as the dominant player in a model of semiconductor is named memory, striking it in a immense space to capitalize on the enhance of man-made intelligence.
Nonetheless the South Korea electronics giant has now fallen on the support of its prolonged-time rival SK Hynix in subsequent-generation chips which had been key part for AI silicon leader Nvidia. The fracture result? Samsung’s profit has plunged, around $126 billion has been wiped off its market label, in accordance with records from S&P Capital IQ, and an government issued a uncommon public apology regarding the firm’s fresh financial efficiency.
Memory is a vital form of chip outdated to store records, and it will also be stumbled on in a plethora of devices from smartphones to laptops. For years, Samsung used to be the undeniable leader on this technology, forward of South Korean rival SK Hynix and U.S. competitor Micron.
Nonetheless as AI features equivalent to OpenAI’s ChatGPT rose in recognition, the underlying infrastructure required to practice the mountainous fashions they rely on changed into an even bigger focal level. Nvidia has emerged because the pinnacle player on this space with its graphics processing devices (GPUs) which salvage change into the gold standard outdated by tech giants for AI coaching.
A really powerful fraction of that semiconductor architecture is excessive-bandwidth memory, or HBM. This subsequent generation of memory contains stacking multiple dynamic random come by admission to memory (DRAM) chips, on the choice hand it had a miniature market earlier than the AI enhance.
That is where Samsung received caught out and did not make investments.
“HBM has been a surely niche product … for a surely prolonged time and Samsung has not centered its assets on its model,” Kazunori Ito, director of equity analysis at Morningstar, informed CNBC by email.
“Which skill of the feature of the technology thinking about stacking DRAMs and the miniature dimension of the addressable market, it used to be believed that the excessive model charges weren’t justified.”
SK Hynix saw this likelihood. The firm aggressively launched HBM chips which had been permitted to be used in Nvidia architecture and, within the technique, the South Korean agency established an in depth relationship with the U.S. giant. Nvidia’s CEO even requested the firm to velocity up supply of its subsequent generation chip, underscoring the importance of HBM to its products.
SK Hynix posted document quarterly working profit within the September quarter.
“With stable R&D (analysis and model) investments and established industry partnerships, SK Hynix maintains an edge in each and each HBM innovation and market penetration,” Brady Wang, associated director at Counterpoint Study, informed CNBC by email.
Samsung informed CNBC that, within the third quarter, total HBM gross sales grew bigger than 70% quarter-on-quarter. The tech giant added that the unusual product is named HBM3E is in mass production and generating gross sales.
The South Korean tech firm popular that model for its subsequent-generation HBM4 is “underway in accordance with opinion” and that the firm is concentrated on starting up “mass production” within the 2d half of 2025.
Can Samsung make a comeback?
Analysts talked about that Samsung is lagging on the support of competitors for a selection of reasons, alongside with underinvestment in HBM and the proven truth that it is not a vital-mover.
“It is lovely to speak that Samsung has not been ready to shut the outlet with SK Hynix on the HBM model roadmap,” Morningstar’s Ito talked about.
Samsung’s capability to make a comeback within the quick term looks to be carefully linked to Nvidia.
A firm should always spin a strict qualification course of earlier than Nvidia approves it as a HBM vendor — and Samsung has not but carried out this verification. Nonetheless a green gentle from Nvidia would possibly per chance birth the door for Samsung to return to enhance and compete more successfully with SK Hynix, in accordance with analysts.
“Since NVIDIA holds bigger than 90% of the AI chip market, where most HBMs are outdated, NVIDIA’s approval is serious for Samsung to make the many of the sturdy demand for AI servers,” Ito talked about.
A Samsung spokesperson talked about that the firm has made “that implies development” regarding HBM3E and has “carried out vital piece within the qualification course of.”
“We demand to commence expanding gross sales within the fourth quarter,” the spokesperson talked about.
Within the intervening time, Wang popular that Samsung’s energy in analysis and model, as smartly because the firm’s semiconductor manufacturing capacity that would possibly per chance inspire it come by up to SK Hynix.
