THE KOREA ECONOMIC DAILY, GLOBAL EDITION

Samsung Electronics Co. expects it will be ready to ship its fifth-generation high-bandwidth memory (HBM) chips, or HBM3E, in the second half, demonstrating its confidence in obtaining orders from Nvidia Corp. after posting stellar chip business results for the second quarter.

“We delivered our eight-layer HBM3E samples to our key customers early last quarter when we prepared the chip’s ramp-up for mass production, and its qualification test is underway without any issues,” Kim Jae-june, executive vice president of Samsung's memory chip business, said during an earnings conference call on Wednesday.

“We expect (HBM3E’s) mass production will begin in the third quarter.” 

The company is also ready to mass-produce the industry’s first 12-layer HBM3E chips and will expand supply to multiple customers in the second half, according to the company.

Considering that HBM supply volumes are determined in advance based on contracts with customers, Samsung’s confirmation of its high-end memory chip’s mass production schedule raised expectations that the South Korean chip giant will soon pass Nvidia’s qualification test for its HBM3E chips.

Samsung did not disclose the names of its customers, but its comments hinted at possible HBM3E orders from other graphics processing unit (GPU) suppliers such as Advanced Micro Devices Inc. (AMD).

According to media reports last week, the Korean memory giant passed Nvidia’s qualification tests for its fourth-generation HBM, or HBM3 chips, for use in the latter’s AI application processors.

The report heightened market expectations that Samsung’s HBM3E would also gain the nod from the US AI chipset maker.

Kim declined to comment on the qualification tests of its HBM3E with Nvidia, citing a non-disclosure agreement with the customer.

Samsung’s archrival SK Hynix Inc. is the only HBM3E supplier to Nvidia.

Reflecting high expectations for the company’s HBM3E orders, market bellwether Samsung Electronics' shares rose 3.6% to end at 83,900 won on Wednesday, helping the broad Kospi market rise 1.1%. 

HIGHER MEMORY CHIP PRICES

Earlier Wednesday, Samsung Electronics confirmed its operating profit for the second quarter ended in June at 10.4 trillion won ($7.5 billion) in line with its preliminary results thanks to unwavering demand for its mainstay memory chip products on the ongoing artificial intelligence boom.

Earlier this month, the Korean chip giant estimated its operating income for the April-June period at 10.4 trillion won, soaring more than 15-fold from the same period last year and up 58.1% from the previous quarter.

The second-quarter figure beat Samsung’s 2023 full-year operating profit of 6.57 trillion won.

Sales for the cited quarter increased 23.4% year-over-year to 74.1 trillion won, also meeting the guidance figure, according to the company’s regulatory filing this morning.

Samsung Electronics attributed the stellar results to a recovery in the memory chip market driven by strong demand for high-end memory products to run both generative AI and general servers.

It reported that its Device Solutions (DS) division, which oversees its chip business, posted 6.5 trillion won in operating profit in the second quarter on sales of 28.6 trillion won.

Samsung said that as demand for its high-performance premium chip products continued rising from AI chipsets, data center servers and devices that run AI services, its sales of high-end chips, such as double data rate 5 (DDR5), server solid-state drive (SSD) and HBM chips, jumped last quarter from the first quarter.

Especially, HBM sales increased by mid-50% from the first quarter, said Kim.

Its System LSI division also delivered record-high sales for the first half of this year, the company said, attributing the strong sales to a surge in the supply of key components such as systems on chips (SoCs), image sensors and display driver ICs (DDIs) for major flagship products in the second quarter.

The number of its foundry business customers from the AI and high-performance computing sectors nearly doubled.

Its Device eXperience (DX) division, which makes and sells smartphones, displays and appliances, reported 2.7 trillion won in operating profit in the second quarter on sales of 42.1 trillion won, the company announced.

Mobile device sales dropped from the previous quarter when the company’s new flagship smartphone Galaxy S24 series hit the market.

SOLID DEMAND FROM AI CHIPSETS AND SERVERS IN Q3

The company remains optimistic about its semiconductor business for the rest of this year.

It expects HBM3E to play a key role in boosting the chip division’s overall sales in the second half. HBM3E chips are projected to account for about 15% of its total HBM sales in the third quarter and about 60% in the fourth quarter, Kim said.

Samsung plans to ramp up HBM chip production to expand the supply of its fifth-generation HBM memory, or HBM3E chips, in the second half of this year, it said.

Kim said the company expects HBM sales will continue to climb in line with production ramp-up and plans to expand HBM production for next year by more than double from this year.

It is currently developing sixth-generation HBM memory, or HBM4, to release the new high-end memory chip in the latter half of next year. The Korean chip maker is also working with multiple customers to deliver customized HBM chips.

It also expects strong foundry orders from the AI and high-performance computing industries for the rest of this year.

The company spent 8.1 trillion won on research and development and 12.1 trillion won in capital expenditures in the second quarter, according to the filing.

(Updated with the company’s earnings conference call on its HBM3E mass production schedule and HBM outlook)

Write to Jeong-Soo Hwang and Chae-Yeon Kim at hjs@hankyung.com

Sookyung Seo edited this article.