Samsung memory. (Bloomberg)
The $160 billion memory market is bouncing back this year after a severe post-Covid downturn, driven by the rise in data centres and AI development. The demand for memory chips has increased, pushing average prices up by 15% from the previous quarter, according to CLSA. This surge has helped Samsung's largest division recover from last year's losses.
Rising Demand for Memory Chips
Both DRAM and NAND prices have surged due to the growing need for AI servers and enterprise data storage. This demand has helped reverse inventory valuation losses, says Sanjeev Rana, an analyst at CLSA Securities Korea. Samsung's contract chip-making operations also benefited from improved IT demand.
Record Semiconductor Exports
South Korea's government recently reported a record in semiconductor exports for June, driving the trade surplus to $8 billion, the largest since 2020. This is a positive sign for the industry and for Samsung, which is set to announce detailed earnings on July 31.
AI Chip Market Concerns
While Samsung is benefiting from a broader industry recovery, there are concerns about its position in the AI chip market compared to SK Hynix Inc. SK Hynix has become the leading supplier of high-bandwidth memory (HBMs), crucial for AI hardware. Samsung has struggled to get its latest HBM chips certified by Nvidia Corp., a dominant player in the AI accelerator market.
Upcoming Challenges
Samsung is also facing labour challenges. Union organizers plan a three-day walkout among its 28,000-plus members, including key chip plants, over a pay dispute. This follows a small strike last month, the first in the company's 55-year history. The impact of the upcoming walkout on operations remains uncertain.
Focus on AI Memory and Market Competition
In the long term, Samsung aims to expand its business in AI memory while addressing concerns about oversupply. Investors are watching Samsung's response to SK Hynix, which recently reported its fastest revenue growth since 2010. SK Hynix shares have surged about 60% since early 2024, while Samsung's stock has only risen by about 8%.
Leadership Changes and Future Plans
In May, Samsung appointed Jun Young Hyun, a veteran in the memory chip sector, as the new leader of its crucial business line, replacing Kyung Kye-hyun. This leadership change aims to strengthen Samsung's position in the competitive market.
Sustaining Momentum in Smartphones
Despite previous slowdowns in chip demand, Samsung has relied on strong smartphone sales to maintain its performance. South Korea's biggest company is hosting a Galaxy Unpacked event in Paris next week to keep the momentum going for its phone business.
