Operating profit in the second quarter rose 1,458% year-over-year to 10.4 trillion won ($7.6 billion), fuelled by the boom in high-bandwidth memory chips.
South Korean billionaire Jay Y. Lee’s Samsung Electronics saw its revenue and profit skyrocket in the second quarter, driven by intensifying demand for its memory chips that power servers and essential AI units.
Operating profit rose 1,458% year-over-year to 10.4 trillion won (about $7.6 billion), while revenue rose 23% year-over-year to 74 trillion won, Samsung announced Wednesday. The tech giant’s shares closed up 3.58% Wednesday.
Samsung generated 21.7 trillion won from its sales of memory chips, up 142% year-over-year – accounting for 30% of its total revenue. The electronics giant attributed the jump to “favorable memory market conditions,” which increased average sales prices. Key among these chips are high-bandwidth memory (HBM) chips, which use vertically stacked chips to support faster processing speeds while consuming less power. HBM chips are a crucial component of Nvidia’s graphics processing units, which help power AI services like ChatGPT.
“In the second half of 2024, AI servers are expected to take up a larger portion of the market as major cloud service providers and enterprises expand their AI investments,” the company added in a statement. Demand for these AI servers, which are equipped with HBM chips, is expected to “remain strong,” linked to continued AI investments from both cloud service providers and businesses using on-premise servers. Earlier this week, tech giants Alphabet and Microsoft announced they would increase capital expenditure to tap into AI advancements, with Alphabet’s expenditures rising 90% year-over-year to $13 billion.
In the global HBM market, Samsung faces steep competition from Korean billionaire Chey Tae-won’s SK Hynix, SK Group’s memory chip arm. SK Hynix controls over 90% of the market for HBM3 chips, a type of advanced HBM chip, according to market research firm TrendForce. In March, SK Hynix commenced production of the world’s most advanced HBM chips, the HBM3e, which the company claims can process data up to 1.15 terabytes per second – around 25% faster than its predecessor, the HBM3.
Samsung has yet to receive approval for its HBM chips from Nvidia, the dominant supplier of AI chips. In March, billionaire Jensen Huang, Nvidia’s cofounder and CEO, reportedly expressed interest in Samsung’s HBM chips, a moment made viral by a photo of Huang’s signature and the word “approved” on a prototype of Samsung’s HBM3e. Just two months later, in May, Samsung’s HBM chips reportedly failed several crucial heat and energy consumption tests. Earlier this month, Nvidia cleared Samsung’s HBM3 chips for use in China, Reuters reported, citing sources.
Surging demand for HBM chips has benefited other semiconductor giants, such as equipment maker Hanmi Semiconductor. The company’s founder and CEO, Kwak Dong Shin, became a billionaire last April, joining the ranks of Korea’s 50 Richest following an AI boom that led his company’s shares to shoot up 600% in the past year. Hanmi offers its clients, including SK Hynix and Micron Technology, processing equipment to stack, connect and inspect HBM chips.
Samsung also operates a foundry, or contract chipmaking service, which the company says will “continue expanding orders” for AI and high-performance computing. In June, the company announced its 4-nanometer process will commence mass production next year. This 4-nanometer process will be used in Samsung’s cutting-edge HBM chips, as part of the company’s bid for HBM dominance, according to local media.
The chips Samsung produces at its foundry are used to power its smartphones. The Exynos 2400 chipset, for example, is used for its flagship Galaxy S24 phones, which went on sale in January. The Exynos 2400 enables these phones to leverage Google’s generative AI technology, with functions including real-time voice call translation and a search tool that allows users to draw a circle over any image to search for related information. While revenues for Samsung’s smartphone business declined to 27.38 trillion won, which Samsung attributed to “seasonal trends,” the company stated it expects overall demand for mobile phones to increase year-on-year.
This article was originally published on forbes.com and all figures are in USD.
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