Samsung Faces Setback In AI Memory Market As Rival SK Hynix Surges Ahead

South Korea: Samsung Electronics, once a dominant force in the memory chip market, is facing a significant challenge as it falls behind its South Korean rival SK Hynix in the rapidly growing sector of high-bandwidth memory (HBM), a crucial component for artificial intelligence (AI) applications. This shift comes at a time when AI's rise has dramatically boosted the demand for advanced semiconductors, particularly those used in training large AI models.

The struggle has severely impacted Samsung’s financial performance, with around 126 billion dollars in market value lost, according to S&P Capital IQ data. The company’s profit has taken a sharp dive, and in an unusual move, a Samsung executive publicly apologised for the disappointing results.

Memory chips, essential for storing data in everything from smartphones to computers, have long been a key area of expertise for Samsung, which had previously outpaced competitors such as SK Hynix and U.S.-based Micron. However, the surge in AI-driven demand for next-generation chips has put the spotlight on HBM, a type of memory that involves stacking multiple DRAM chips to enable faster data processing, according to a CNBC report. 

SK Hynix Stock Surges Ahead In AI Chip Race

Initially, HBM was considered a niche product, with a limited market and high development costs, leading Samsung to under-invest in the technology.

SK Hynix to Launch HBM Chip

This created an opportunity for SK Hynix, which recognized the growing importance of HBM in AI infrastructure and moved quickly to develop and launch HBM chips. SK Hynix's efforts paid off, as its chips were adopted by Nvidia, the leader in AI silicon, for its AI training models. In fact, Nvidia even requested that SK Hynix accelerate the supply of its HBM chips, solidifying the South Korean firm’s crucial role in the AI ecosystem. As a result, SK Hynix has posted record profits, further strengthening its position in the market.

Samsung Reported 70% Increase In HBM Sales in Third Quarter 

In response to the growing demand, Samsung reported a 70 percent increase in its HBM sales in the third quarter of this year, while also noting that its HBM3E product is in mass production. The company has confirmed that the development of its next-generation HBM4 is on track, with plans for mass production set to begin in the second half of 2025. However, it remains to be seen whether Samsung can regain the lead in this critical sector, especially with SK Hynix already entrenched as Nvidia’s preferred supplier.

Experts point out that SK Hynix’s strong focus on research and development, coupled with its strategic partnerships with key players in the AI industry, has given it a distinct advantage. Meanwhile, Samsung is working to catch up, but the company faces a tough challenge as the demand for AI-specific chips continues to grow.