Samsung anticipates AI-powered demand surge in second half following strong Q1

Samsung embraces AI: Samsung Electronics foresees strong demand for artificial intelligence driving technology needs in the latter half of the year following a robust performance in the first quarter.

The leading memory chip manufacturer reported an over tenfold surge in first-quarter operating profit, sparking a 1.8 per cent rise in its shares on Tuesday.

Samsung is optimistic about capitalising on the rebounding global memory chip market. It aims to boost its position by ramping up the production of high-end chips, particularly high bandwidth memory (HBM), which are crucial for AI applications.

Increased chip supply

Jaejune Kim, a vice president at Samsung's memory division, announced plans to triple the supply of HBM-related chips in 2024 compared to the previous year. The company has initiated mass production of the latest 8-layer HBM3E chips, targeting generative AI chipsets. Additionally, Samsung intends to commence production of the 12-layer version in the second quarter, with expectations that HBM3E products will constitute two-thirds of its HBM output by year-end.

Analysts view Samsung's targets as ambitious. While Samsung's 8-layer HBM3E chips seem geared towards Nvidia, the 12-layer version may cater to both AMD and Nvidia. Samsung's technological advantage in high-stacking could lead to a market segmentation where Nvidia receives 12-layer products from Samsung and 8-layer products from SK Hynix.

In response to the growing AI server demand, Samsung plans to expand its offerings of high-end solid-state drives (SSDs). However, it anticipates a tightening supply of high-end memory chips towards the end of the year due to increased focus on HBM production.

Samsung's profit rebound

The company's first-quarter revenue surged by 13 per cent, driven by a 96 per cent increase in memory chip revenue, buoyed by the AI boom. Samsung's chip division, which historically contributed to its operating profit, swung back to profit after experiencing losses in the previous year.

Despite facing challenges such as rising costs, Samsung's mobile devices business maintained profitability in the first quarter. The introduction of AI features in its flagship Galaxy S24 smartphones helped sustain double-digit profitability, with a notable part of customers attributing their purchase to these AI functions.

(With Reuters Inputs)