Samsung Electronics’ second-quarter earnings far exceeded market expectations as global demand for generative AI boosted memory chip sales. The South Korean company is regaining its competitive edge in the high-end memory chip sector, including high-bandwidth memory (HBM) and high-performance DDR5 DRAM. Samsung Electronics is the world’s biggest memory chipmaker, but its rival, SK Hynix, outperformed Samsung in the high-end memory market last year as the sole supplier of HBM chips to U.S. tech giant Nvidia.
The company’s performance in the second half of the year is set to improve with the mass production of the fifth-generation HBM, known as HBM3E, in the third quarter. Analysts expect Samsung Electronics’ HBM3E will soon pass Nvidia’s quality tests and begin full-scale deliveries.
Samsung Electronics said on July 31 that the company’s operating profit reached 10.44 trillion won ($7.55 billion) in the three months to June, a 1462.29% surge from the same period last year. The company’s quarterly operating profit crossed the 10 trillion won mark for the first time since the third quarter of 2022. Revenue stood at 74 trillion won, up 23.44% year-on-year.
The Device Solutions division, responsible for the semiconductor business, generated 28.56 trillion won in revenue and 6.45 trillion won in operating profit. Given that the non-memory division incurred losses of between 400 billion and 500 billion won, roughly 70% of Samsung’s total operating profit came from the memory division.
The company’s strong performance was driven by high-value memory chip products such as HBM and DDR5 DRAM for servers. “The volume of HBM contracts negotiated with customers this year is four times that of last year,” the company said during the second-quarter earnings call. In the third quarter, Samsung expects to mass produce HBM3E, which SK Hynix currently dominates in terms of market share, and begin deliveries to customers in the second half of this year.
“12-layer HBM3E products are ready for mass production, and we expect to expand supply to a full-scale supply in the second half of the year,” Samsung Electronics stated. “HBM3E products achieve a high level of packaging yield and are projected to make up 60% of total HBM sales by the fourth quarter.” Once the share of HBM3E sales increases in the second half of this year due to its higher price point, overall HBM sales are also projected to grow more than 3.5 times compared to the first half.
Analysts and industry insiders are also looking forward to Samsung’s HBM business finally gaining momentum. The company’s fourth-generation HBM3 chips have passed Nvidia’s quality tests, and its latest HBM3E is expected to follow suit in the second half.
“Samsung Electronics’ HBM3E will receive approval from Nvidia in August or September this year,” said Kim Dong-won, head of research at KB Securities. “Samsung recently completed the PRA (production readiness approval) internal procedure, the final step before full-scale mass production, and will begin producing HBM3E 8- and 12-layer units in the fourth quarter,” he added.
