Samsung Electronics reported an 86% decrease in net income in the quarter ending in June, but confidently pledged to continue cutting memory chip production while forecasting a sales rebound in the second half of the year. The company believes that artificial intelligence (AI) demand will contribute to increased memory demand by the end of the year.
To capitalize on the expected boom in AI, Samsung plans to double its capacity to produce high-bandwidth memory (HBM), a next-generation technique used for AI training, by 2024. This commitment to developing new technology has pleased investors, leading to a 2.7% increase in Samsung’s shares in Seoul. Samsung is currently in a race with SK Hynix Inc. to develop tools crucial to AI advancement.
In the meantime, Samsung and Hynix are aiming to weather economic uncertainty by reducing the output of NAND chips used in PCs and phones to combat sliding prices. Analysts believe that the worst is behind for memory prices as there was a rebound in the second quarter for Hynix, and Samsung is expected to see gains in the third quarter.
Samsung expects generative AI to drive a rapid increase in demand for high-performance memory capable of processing large amounts of data. However, the demand for general servers and storage is relatively limited. Due to macroeconomic uncertainties, Samsung has chosen not to provide a bit shipment guidance for the full year.
Despite the decrease in net income, Samsung’s second quarter results exceeded expectations, thanks to a weak won. The company anticipates catching up to SK Hynix in the HBM market, with accelerated HBM shipments expected in 2024. Samsung is also striving to win more orders for AI-supporting chips while expanding its foundry business to compete with Taiwan Semiconductor Manufacturing Co.
Samsung’s results are closely watched by investors in the tech industry as they seek hints on when demand for electronics and semiconductors will rebound. The company is considered a barometer for the memory industry, which is currently dealing with bulging inventories. Additionally, Samsung is focusing on the growth potential of its automotive memory chips, expecting more than a 30% growth in the next five years.
In the smartphone market, Samsung aims to increase shipments and improve average selling prices in the current quarter. The company recently introduced its fifth generation of foldable smartphones to compete with upcoming products from Apple. Samsung is also exploring a lower-cost option to capture market share in the growing foldable phone category. Additionally, the company is working on a mixed-reality device and building an ecosystem to support content development in this emerging field.
