Samsung’s AI second is right here, however is it prepared?



The introduction of ChatGPT has lit a fireplace beneath the shares of corporations that produce microchips, the brains of synthetic intelligence. Bets have been positioned on the potential of so-called generative AI. Probably the most putting instance of rallying is Silicon Valley. Nvidiathe most important vendor of chips utilized in synthetic intelligence, whose shares are up almost 200 p.c this yr.

Samsung Electronics, the South Korean large, hopes to get in on the motion. Extensively recognized for its shopper merchandise, Samsung additionally has the world’s largest reminiscence chip enterprise and the second-busiest semiconductor foundry, which makes customized microchips for different corporations.

Overseas traders have purchased $8 billion of Samsung shares on South Korea’s inventory market this yr — already the biggest quantity of international purchases in Samsung in any yr since 2000, based on CLSA, an funding agency in Hong Kong. In response to the information. The rise stalled over the previous three years, when international traders offered extra of the corporate’s inventory than they purchased.

At an occasion in California final week, Samsung detailed what it known as a “dream within the AI ​​period.” Samsung believes it could actually take market share from main chip maker Taiwan Semiconductor, however not too long ago the development has gone the opposite manner. In response to Counterpoint Analysis, a market analysis agency, TSMC will get about 60 p.c of whole income within the international foundry enterprise and Samsung simply 13 p.c — a spot that may widen by 2021 as a few of Samsung’s prospects, together with Nvidia, promote their companies. has moved. TSMC.

Samsung stated it spent $7.4 billion within the first quarter of this yr — when its income fell 95 p.c — on its chip enterprise, a part of which is predicted to serve the AI ​​{industry}. It’s ramping up manufacturing at its chip manufacturing complicated in Pyeongtaek, 40 miles south of Seoul, in addition to a chip manufacturing unit in Texas. Over the subsequent 20 years, Samsung stated, it plans to work with the federal government on a $230 billion venture to construct a chip-making “megacluster” in South Korea.

That expectation is tied to Samsung’s reminiscence chip enterprise, which accounts for about half of the corporate’s working revenue in a mean yr, stated Sanjeev Rana, a senior analyst at CLSA.

In comparison with conventional servers — the {hardware} that underlies desktops and databases — servers designed for synthetic intelligence might have 4 occasions as a lot reminiscence, known as DRAM. Samsung accounts for about 45 p.c of the worldwide DRAM market. And it is the one main reminiscence firm to put money into extra manufacturing regardless of industry-wide declines in reminiscence costs, Mr. Rana added.

The chip {industry} is understood for its increase and bust cycles. After a surge in demand for reminiscence chips through the pandemic, chipmakers started their worst hunch in years final fall. Samsung’s reminiscence chip rivals, together with U.S.-based Microtechnology and South Korea’s SK Hynix, stated they’d reduce on funding in manufacturing this yr.

Some analysts imagine that Samsung’s down-cycle spending will repay in the long term when the reminiscence sector recovers, partly because of synthetic intelligence.

“If the demand comes again, they are going to be prepared,” Mr. Rana stated.

However skeptics query whether or not Samsung can obtain the type of integral position in maker AI that it has in smartphones and high-resolution televisions. It misplaced final yr when Nvidia selected SK Hynix as its provider for high-power reminiscence chips which might be anticipated to develop into a fast-growing enterprise line because of its significance in future AI servers.

SK Hynix controls about 50 p.c of that marketplace for high-bandwidth reminiscence, or HBM, in contrast with Samsung’s 40 p.c, based on TrendForce, a market analysis agency. Shares of SK Hynix are up greater than 50 p.c this yr, outpacing Samsung’s 30 p.c achieve.

Samsung stated it has already began supplying “key prospects” with a competing model of HBM. The subsequent era of its HBM is about to launch this yr, it added.

Samsung’s break in HBM expertise could possibly be an indication of broader issues, stated Nam Hyung Kim, an analyst at Arte Analysis, an fairness analysis agency. In a report in February, Mr. Kim wrote that Micron had additionally wrapped Samsung’s expertise in DRAM and one other sort of reminiscence, NAND flash.

“The issue with Samsung is that they all the time wish to get larger,” Mr. Kim stated. “They’re spending some huge cash, however they’re now not the chief in expertise.”

Mr Kim stated Samsung ought to make investments extra in analysis and never fear a lot about market share. “Samsung is a much bigger participant than Apple in smartphones,” he stated. “However how many individuals assume that Samsung makes higher smartphones than Apple?”

Samsung stated in a press release that it has succeeded in lots of features of superior semiconductor applied sciences and that it could actually provide prospects “complete options” within the evolving panorama of AI and different applied sciences.

Samsung’s personal officers have provided a extra photo voltaic evaluation.

In Could, the president of Samsung’s semiconductor division, Kyung Kye-hyun, admitted in a chat to college college students that the corporate is “behind” TSMC by two years. The feedback, which have been extensively circulated Korean mediahave been a uncommon entry for an organization that has lengthy prided itself on its tech management.

Mr Kyung promised that Samsung’s reminiscence chips would develop into the “core” of AI supercomputers by 2028. “We will outperform TSMC inside 5 years,” he stated.

Jane Yu Younger Contributed to reporting.


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