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Samsung’s AI Moment Is Here, But Is It Ready?

The introduction of ChatGPT has set fire to the stocks of companies that produce microchips, the brains of artificial intelligence. Bets have been placed on the potential of so-called generic AI. The most striking example of rally is Silicon Valley NVIDIAThe top seller of chips used in artificial intelligence, whose shares have risen nearly 200 percent this year.

South Korean giant Samsung Electronics is hoping to get in on the action. Widely known for its consumer products, Samsung also has the world’s largest memory chip business and the second busiest semiconductor foundry, manufacturing custom microchips for other companies.

Foreign investors have bought $8 billion worth of Samsung shares on the South Korean stock market this year, according to data provided by CLSA, a Hong Kong-based investment firm – the most foreign purchases of Samsung in any year since 2000. There is a large quantity. The surge reversed a sell-off over the past three years, when foreign investors sold more of the company’s stock than they bought.

At an event in California last week, Samsung detailed what it called “its vision in the AI ​​age.” Samsung believes it can snatch market share from leading chip maker, Taiwan Semiconductor Manufacturing Co., but recently the trend has gone the other way. According to market research firm Counterpoint Research, TSMC receives about 60 percent of total revenue in the global foundry business and Samsung only 13 percent — a gap that has widened since 2021 as some of Samsung’s customers, including Nvidia, increase their foundry business. The business has shifted. TSMC.

Samsung said it spent $7.4 billion on its chip business in the first quarter of this year — when its profits plunged 95 percent, part of which is expected to serve the AI ​​industry. It is expanding production at its chip-manufacturing complex in Pyeongtaek, about 40 miles south of Seoul, as well as a chip factory in Texas. Samsung said, over the next 20 years, it plans to work with the government on a $230 billion plan to build a chip-making “megacluster” in South Korea.

The optimism stems from Samsung’s memory chip business, which makes up about half of the company’s operating profit in an average year, said Sanjeev Rana, a senior analyst at CLSA.

Compared to traditional servers – the hardware that underpins desktops and databases – servers built for artificial intelligence may require up to four times as much memory, known as DRAM. Samsung has about 45 percent of the global DRAM market. And it is the only major memory company that has invested in more production despite an industrywide drop in memory prices, Mr. Rana said.

The chip industry is known for its boom-bust cycles. After surging demand for memory chips during the pandemic, chip makers hit the worst of last year’s recession. Samsung’s memory chip rivals, including Micron Technology in the United States and SK Hynix of South Korea, said they would cut investment in production this year.

Some analysts believe that Samsung’s spending in the down cycle will be beneficial in the long run when the memory sector recovers, partly due to artificial intelligence.

“If demand comes back, they will be very much ready,” Mr. Rana said.

But skeptics question whether Samsung can achieve the kind of indispensable role in generic AI that it had in smartphones and high-resolution televisions. It lost out last year when Nvidia chose SK Hynix as its supplier for the high-powered memory chip, which was expected to become a fast-growing business line because of its prominence in future AI servers.

SK Hynix controls about 50 percent of that market for high-bandwidth memory, or HBM, while Samsung has 40 percent, according to market research firm Trendforce. Shares of SK Hynix have risen more than 50 percent this year, outpacing Samsung’s 30 percent gain.

Samsung said it has already started supplying “key customers” with a competing version of HBM. It added that the next generation of its HBM is due to be launched this year.

Nam Hyung Kim, an analyst at equity research firm Arete Research, said Samsung’s lag in HBM technology could be a symptom of wider issues. In a report in February, Mr. Kim wrote that Micron has also overtaken Samsung’s technology in DRAM and another type of memory, NAND flash.

Mr. Kim said, “The problem with Samsung is that they always want to be big.” “They’re spending a lot of money, but they’re not the leader in technology anymore.”

Mr Kim said Samsung should invest more in research and not worry so much about market share. “Samsung is a bigger player than Apple in terms of smartphones,” he said. “But how many people think Samsung makes better smartphones than Apple?”

Samsung said in a statement that it has succeeded in many aspects of advanced semiconductor technologies and can provide customers with “comprehensive solutions” in the evolving landscape of AI and other technologies.

Samsung’s own officials have offered a more serious diagnosis.

In May, Kyung Kae-hyun, president of Samsung’s semiconductor division, admitted in a talk to university students that the company “lags behind” TSMC by two years. Comments that circulated widely korean mediaThat was a rare acknowledgment for a company that has long prided itself on its technological leadership.

Mr. Kyung pledged that Samsung’s memory chips would become the “core” of AI supercomputers by 2028. “We can outperform TSMC within five years,” he said.

jin yoo young Contributed reporting.

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