With Nvidia, a leading artificial intelligence (AI) semiconductor company, announcing surprising financial results, warmth is spreading among domestic semiconductor companies. This is due to the fact that Samsung Electronics and SK hynix hold a dominant position in the high bandwidth memory (HBM) market, which is essential for AI semiconductors. The competition between the two companies is also intensifying.
According to the Korea Exchange on Aug. 24, Samsung Electronics closed at 68,200 won (US$51.47), up 1.64 percent, or 1,100 won, from the previous day’s closing price. Meanwhile, SK hynix recorded a gain of 4.22 percent, or 4,900 won, closing at 120,900 won.
Last night, Nvidia unveiled impressive financial results. Nvidia announced that it had achieved revenues of US$13.51 billion (approximately 17.88 trillion won) and earnings per share (EPS) of US$2.70 for the second quarter between May and July. These figures exceeded market expectations, which had predicted revenues of US$11.22 billion and EPS of US$2.09.
Notably, the data center division achieved record-breaking performance, with revenues of US$10.32 billion, marking whopping 171 percent growth compared to the same period last year. Data center division revenues had already exceeded market expectations in the first quarter, with a growth of 14 percent year-over-year to reach US$4.28 billion. However, the second quarter witnessed even more substantial growth. Data center revenues are closely tied to the demand for AI-oriented semiconductor chips. Generative AI models like ChatGPT require powerful graphics processing units (GPUs), in other words, AI semiconductors, to handle vast amounts of data.
The surge in demand for AI semiconductors is expected to benefit Samsung Electronics and SK hynix, as the demand for HBM also rises with it. According to Taiwanese market research firm TrendForce, the global HBM market share for the three major memory semiconductor giants – SK hynix, Samsung Electronics and Micron – was estimated at 50 percent, 40 percent, and 10 percent, respectively, as of last year. Additionally, it is projected that the market share of these two South Korean companies will expand from 90 percent this year to 95 percent next year.
In the current landscape of the HBM market, SK hynix emerges as the front runner. HBM technology has advanced from its first generation to the fourth generation (HBM3), with SK hynix emerging as the exclusive producer of fourth-generation product. SK hynix has also extended its innovation to fifth-generation HBM3E and has already commenced sample distribution to its clientele. In terms of stock performance, SK hynix is displaying a more favorable trend compared to Samsung Electronics.
Samsung Electronics recently completed quality approval for its fourth-generation products, placing it slightly behind SK hynix in this aspect. However, Samsung Electronics has a significant advantage on the global market with the establishment of an HBM turnkey system as the sole player in the market.
The strong demand for AI-driven memory semiconductors is seen as a significant opportunity for both companies in the long run, according to stock analysts. While the macroeconomic conditions are not necessarily favorable compared to the AI demand, there is an expectation that profitability will recover due to the rising prices of high-capacity memory chips.