Samsung Electronics’ first-quarter preliminary earnings revealed a remarkable turnaround for the semiconductor division, with the chip business posting a profit for the first time in five quarters. But South Korea’s leading chipmaker still needs to catch up with competitors who have advanced in the AI chip market centered on high-bandwidth memory (HBM) and improve the performance of its non-memory business, which is still incurring losses.
Currently, SK Hynix is the only company supplying fourth-generation HBM chips, the HBM3, to Nvidia, the U.S. tech giant that dominates the AI chip market. HBM chips are crucial components of Nvidia’s graphics processing units (GPUs), which power generative AI systems such as OpenAI’s ChatGPT.
Samsung Electronics fell behind in the race for the fourth-generation HBM, handing over market leadership to SK Hynix. Determined to take back the lead in the fifth-generation HBM (HBM3E) market, Samsung is aiming to mass produce its HBM3E products in the first half of this year. The company recently introduced a fifth-generation HBM model with the largest capacity, 36 gigabytes, and has provided samples to Nvidia.
Samsung also announced plans to launch its first in-house AI accelerator chip called Mach-1 next year. An AI accelerator is a hardware designed to speed up the efficiency and performance of AI applications. Samsung wants to compete with Nvidia, which dominates this sector.
In broad terms, semiconductors are classified into two main categories: memory chips, which include DRAM and NAND flash, and non-memory system semiconductors, such as microprocessors and systems-on-a-chip (SoCs).
Samsung also needs to boost its non-memory performance. The company’s foundry (contract chipmaking) and system LSI division is expected to have posted losses in the first quarter due to slow recovery in smartphone and PC demand, according to analysts.
Exynos, Samsung’s in-house application processor (AP), is also in desperate need of a turnaround. APs are critical components of smartphones and account for approximately 20% of a smartphone’s total cost. Exynos is crucial as it directly impacts the performance of several divisions within the company. The system LSI division handles its design, the foundry division is responsible for its manufacturing, and the MX division makes smartphones.
Last year, due to performance issues, Samsung equipped the Galaxy S23 series with Qualcomm’s Snapdragon AP instead of Exynos. This year, after improving the performance of Exynos, Samsung has incorporated it into the AI-powered Galaxy S24 series. The upcoming foldable Galaxy Z series, slated for release later this year, is also expected to feature Exynos.
