Samsung Struggles to Catch Up with SK Hynix in AI Chip Race Despite Modest Wins

Samsung Electronics' chip division has reported quarterly profits that fell short of expectations, casting a shadow over the prospects of the world's largest memory chip manufacturer as it strives to close the gap with major competitor SK Hynix in the artificial intelligence sector. Samsung's semiconductor unit revealed an operating profit of 2.9 trillion won ($2.1 billion) for the fourth quarter of last year, which is significantly below the analysts' average forecast of 4.78 trillion won and also lower than the 3.86 trillion won from the previous quarter.

Despite earlier this month's disappointing preliminary data on operating profit and revenue, Samsung's net profit of 7.58 trillion won exceeded the average analyst expectation of 7.95 trillion won. However, in the field of High Bandwidth Memory (HBM), Samsung is trailing SK Hynix, having yet to supply HBM chips to Nvidia. Nvidia's CEO, Jensen Huang, has indicated that Samsung needs to "design a new solution" to become a supplier of HBM chips for Nvidia.

In contrast, SK Hynix has prospered from the surge in AI demand, witnessing its fourth-quarter operating profit soar more than twentyfold year-on-year to 8.1 trillion won, with sales increasing by 75% to 19.8 trillion won. During the last quarter, HBM chips constituted 40% of SK Hynix's total DRAM chip revenue, and the company forecasts its HBM chip sales to more than double this year.

Samsung has ramped up its expenditure on research and development as well as front-end capacity expansion to compete with SK Hynix and Micron Technology in the HBM chip sector. Simultaneously, Samsung is grappling with waning demand for traditional semiconductor chips used in personal computers and mobile devices. Earlier this month, the company acknowledged facing intensifying competition in its smartphone, television, and other home appliance segments, and noted a decrease in its foundry business utilization rate.

Investors continue to question Samsung's ability to reassume leadership in the HBM chip market. However, recent developments suggest progress, as Samsung has reportedly gained approval to supply a version of its fifth-generation HBM chips to Nvidia. It is noted that Samsung's 8-layer HBM3E (a lower-tier version of HBM3E) received approval from Nvidia in December of last year. Although these advancements are modest, they mark significant progress in Samsung's year-long effort to secure the HBM3E chip approval from Nvidia, despite the company's position behind SK Hynix, which began mass production of 8-layer HBM3E chips at the start of 2024 and had already commenced supplying more advanced 12-layer varieties by the end of last year.