[Peace&Chips] SK Hynix Proves 'AI Demand'... Samsung Semiconductor Expected to Return to Profitability

Strong Q1 Earnings from US Big Tech Boost AI Investment Expectations
SK Hynix Reports Q1 Earnings Surprise

AI Drives Increased Demand for HBM and eSSD
Samsung Electronics Q1 Earnings Announcement on the 30th in Focus

As this month begins, warm weather continues day after day. I think many people are looking for restaurants with terraces and going on outings to the Han River and nearby areas. The sunlight is so warm that it has even become hot, and you can now see people wearing short sleeves during the day.

Although the clear weather continues these days, gloomy clouds have also gathered over the semiconductor industry. The "artificial intelligence (AI)" that was a ray of hope during last year's sluggish market has become a factor dragging down the stock prices of major semiconductor companies this month.

Samsung Electronics Pyeongtaek Campus line view / Photo by Samsung Electronics

As concerns grew that AI demand might fall short of market expectations, not only Nvidia, the leading AI semiconductor company, but also Samsung Electronics and SK Hynix could not avoid stock price declines. Nvidia's stock price dropped significantly last week, making its weekly fluctuation the most volatile in a year.

Entering this week, with earnings announcements from AI-related companies, expectations seem to outweigh concerns. This is because US big tech companies like Microsoft (MS) and Alphabet recorded strong earnings, boosting AI investment optimism.

SK Hynix also announced strong first-quarter earnings on the 25th. Thanks to increased sales of high-bandwidth memory (HBM), a type of DRAM for AI, and rising memory prices, it recorded an operating profit of 2.886 trillion won, exceeding market forecasts. The company also projected that the HBM market will continue rapid growth after this year.

What is noteworthy is that NAND flash, another type of memory semiconductor following DRAM, is also seeing demand stir due to AI effects. In particular, SK Hynix explained that sales of enterprise solid-state drives (eSSD), storage devices based on NAND used in AI servers, are rapidly increasing.

Kim Seok, head of NAND marketing at SK Hynix, expressed optimism about AI demand during the first-quarter conference call, saying, "In the long term, with the growth of the AI market and increased AI utilization by individual companies, the advantages of NAND storage are becoming prominent, and the demand for high-performance, low-power storage solutions is materializing."

This market situation is likely positive for Samsung Electronics as well. Samsung Electronics holds the number one market share not only in the overall memory market but also in the eSSD market. Inside and outside the semiconductor industry, there are expectations that Samsung Electronics' DS Division (semiconductors), which expanded its operating losses last year, turned profitable in the first quarter. IBK Investment & Securities and Daol Investment & Securities specifically forecast operating profits in the 2 trillion won range.

Samsung Electronics announced its preliminary first-quarter earnings earlier this month and will release confirmed results on the 30th, the day after tomorrow. Since detailed earnings by business division were not disclosed in the preliminary results, market interest in the upcoming earnings announcement is growing. We should pay close attention to the company's semiconductor performance report for the first quarter.

Editor's NoteSemiconductors, called the rice of modern industry. Although it is a term we hear every day, it is hard to explain. Peace & Chips will make the difficult concepts and overall trends of the semiconductor industry easy to digest for you. Just place your spoon and enjoy.