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Samsung Struggles to Gain Back Position in HBM Market

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Samsung, traditionally a memory chips’ leader, has fallen behind South Korean rival SK Hynix in the flourishing HBM market

Samsung, traditionally a memory chips’ leader, has fallen behind South Korean rival SK Hynix in the flourishing high-bandwidth memory (HBM) market for AI applications, creating a worthy lag in Samsung HBM technology.

Samsung HBM technology lag has resulted in a staggering $126 billion loss in market value and a rare public apology from one Samsung’s Vice Chairman, Jun Young-hyun.

Samsung HBM chips Decline in AI Market

For years, Samsung led the global memory chips market – essential components in everything from smartphones to laptops and its rival, while South Korea’s SK Hynix was the second.

What really changed the equations for the giant was the AI boom arrival, driven by tech giants like Nvidia, that reshaped the semiconductor industry, with new types of HBM chips becoming necessary to AI infrastructure.

The next-generation memory chip used in conjunction with graphics processing units (GPUs) for AI training, has emerged as a key technology. While these memory chips were previously a niche product, their importance reached AI models growth with increased complexity.

Nvidia Is Still Waiting to Certify Samsung’s HBM Chips

AI hardware leader, Nvidia relies on HBM chips to boost the performance of its GPUs. Samsung, on the other hand, struggled to catch up with the advancements made by its competitors, particularly SK Hynix, which has successfully penetrated the HBM market.

SK Hynix’s dedicated investment in HBM has made it the preferred supplier for Nvidia’s AI chips, with its products approved for use in Nvidia’s hardware. This close partnership has boosted SK Hynix’s market position, resulting in record profits in Q3 2023. Thanks to strong research and development (R&D) and strategic partnerships, the company has gained a significant edge in HBM technology, widening the gap with competitors like Samsung.

In response to the Samsung HBM memory chips lag, the company has stormed up production of its HBM3E chips, which its production started late 2023. It also claims to have seen a 70% quarter-on-quarter increase in HBM sales, signaling a step in the right direction. Samsung also confirmed that development for the next-generation HBM4 is underway, with mass production expected to begin in the second half of 2025.

 “It’s fair to say that Samsung has not been able to close the gap with SK Hynix on the HBM development roadmap,” said Kazunori Ito, equity research director at Morningstar.

Samsung HBM chips development failed when the technology was in its early stages, allowing SK Hynix to establish a strong foothold.

To be approved as an HBM supplier for Nvidia’s AI chips, companies must pass a careful qualification process. While Samsung has made progress in this regard, it has not yet completed the verification process for its HBM products.

“Since Nvidia holds more than 90% of the AI chip market, where most HBMs are used, Nvidia’s approval is critical for Samsung to benefit from the robust demand for AI servers,” Ito explained.

Can Samsung Electronics HBM Make a Comeback?

Despite the struggles to keep pace with rivals, Samsung seemed to be confident in its process. with a spokesperson stating that the company has “made meaningful progress” in the qualification process for its HBM3E chips. Samsung expects to begin expanding sales in the fourth quarter of 2023, signaling that it is on track to re-enter the market at full force.

According to analysts, with Nvidia’s approval, Samsung could regain its post in the AI chip market. However, the company faces a tough battle ahead, as SK Hynix continues to dominate the HBM market and Nvidia’s reliance on its chips grows.

The question now is whether Samsung can recover from its recent delays and reclaim its position as a leader in the semiconductor industry. As the demand for AI-driven hardware continues to rise, it all the depends on Samsung’s ability to innovate and secure key partnerships to determine if it can make a comeback or not.

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