Samsung Electronics Co. has committed to continue reducing memory chip production while predicting a sales recovery in the latter half of the year, thanks to the increasing demand for artificial intelligence (AI) driving global tech spending after the Covid-19 slowdown.
The company reported better-than-expected net income and expressed confidence that AI will boost memory demand by the end of the year. Samsung plans to double its capacity for high-bandwidth memory (HBM), a next-gen technology used for AI training, by 2024.
Investors responded positively to Samsung’s outlook and dedication to developing new technology, with shares rising 2.7% in Seoul. Samsung and SK Hynix Inc. are in a race to develop essential tools for AI, capitalizing on the AI boom that began with OpenAI’s ChatGPT.
In the meantime, until the AI-driven demand materializes, both Samsung and Hynix plan to control output of NAND chips used in PCs and phones to stabilize prices.
Analysts believe that the worst is over for the memory chip industry, with prices rebounding for Hynix in the second quarter and expected to gain ground for Samsung in the third quarter. Samsung anticipates generative AI to drive a rapid increase in demand for high-performance memory capable of handling large amounts of data.
However, the company notes that demand for general servers and storage remains relatively limited. Due to macroeconomic uncertainties, Samsung refrains from providing a bit shipment guidance for the full year. The overall memory inventory seems to have peaked in May, but the post-Covid recovery in China has been slow, affecting demand for logic chips.
Despite a challenging global outlook, Samsung remains a bellwether for the tech industry. Its net income fell 86% to 1.55 trillion won ($1.2 billion) in the quarter ending June, but it still exceeded the average estimate, thanks to a weaker won.
SK Hynix, which supplies HBM chips to Nvidia Corp., is expected to be a major beneficiary of AI-related chip demand, with its shares surging more than 9.7% after reporting strong sales.
Samsung is working to catch up on two fronts: securing more AI-supporting chip orders and expanding its foundry business to compete with Taiwan Semiconductor Manufacturing Co. The company invested over 90% of its quarterly capex in chips.
With uncertainties plaguing the global chip market, investors closely watch major tech companies like Samsung for signs of a rebound in electronics and semiconductor demand.
In addition to semiconductors, Samsung’s smartphone business is striving to attract customers. The company expects its smartphone shipments to increase in the current quarter, with the average selling price improving. Samsung has introduced the fifth generation of its foldable smartphones to compete with upcoming products from Apple Inc., and it is exploring a lower-cost option to gain market share in the foldable phone segment.
Furthermore, Samsung is working on a mixed-reality device and plans to build an ecosystem to support content development in this emerging field, which also includes Apple’s Vision Pro headset.
