Samsung announces 'significant' progress in securing supply deal for AI chips

On Thursday, Samsung Electronics announced advancements in a significant supply agreement for chips focused on artificial intelligence, aiming to reassure investors amid a slowdown in semiconductor profits last quarter.

The South Korean tech giant reported that its operating profit for the July-September period surged over 277% compared to the previous year, reaching 9.18 trillion won ($6.65 billion). However, this figure marks a 12% decrease from the second quarter, which Samsung attributed to one-off expenses, including employee incentives in its semiconductor division, as well as the impact of a weaker U.S. dollar.

Samsung’s semiconductor division posted an operating profit of 3.86 trillion won ($2.8 billion) during the quarter, recovering from a loss earlier in 2023, but down sharply from 6.45 trillion won ($4.67 billion) reported in the previous quarter.

While demand for AI and server chips remained strong, Samsung noted a decline in its mobile chip business as some clients adjusted their inventories. The market was also influenced by increased supply of legacy memory products from Chinese manufacturers, the company stated.

More concerning for Samsung is its lag behind key competitors like SK Hynix in HBM3E, the latest generation of high-bandwidth memory chips essential for AI applications.

During a conference call, Samsung Executive Vice President Jaejune Kim indicated that the company had made a “meaningful advance” in qualifying its HBM3E products for an undisclosed “major client,” a development he suggested could boost sales in the fourth quarter. His comments sparked speculation that Samsung might be nearing a supply agreement with Nvidia, a leading U.S. chip designer specializing in advanced AI technology.

Samsung added, “In the fourth quarter, while demand for mobile and PC memory may weaken, growth in AI will sustain strong demand levels. In this context, the company will focus on enhancing sales of high-bandwidth memory and high-density products.”