Lowering HBM Prices?…NVIDIA Fueling Competition Between SK Hynix and Samsung Electronics

With Samsung Electronics' declaration to 'strengthen technological leadership' and signs of intensified competition in the high-bandwidth memory (HBM) market, industry attention is also focused on the moves of Nvidia, the leading artificial intelligence (AI) chip company holding the key to this market. In particular, some analysts suggest that Nvidia is fueling competition between our flagship companies, Samsung Electronics and SK Hynix, who are competing in the HBM market. It is argued that Nvidia is deliberately provoking competition between the two companies to lower the price of HBM supplied to itself.

SK Group Chairman Chey Tae-won is visiting Silicon Valley, USA, on the 24th (local time) and is having a conversation with Jensen Huang, CEO of the American semiconductor company Nvidia. Chairman Chey shared a photo taken with CEO Huang on his Instagram on the 25th of last month. Photo by Chey Tae-won Instagram capture [Image source=Yonhap News]

According to Wall Street and industry sources in the U.S. on the 2nd, Nvidia has been on a downward trend on the New York Stock Exchange ahead of its first-quarter earnings announcement scheduled for the 22nd of this month. At the close of trading that day, Nvidia's stock price fell 3.89% from the previous day to $830.41 (approximately 1.15 million KRW). During the trading day, the stock price at one point dropped more than 5%, reflecting Nvidia's unstable situation.

Nvidia has recently faced concerns about its earnings as peer companies AMD and Super Micro Computer's results and outlooks fell short of market expectations. The sharp rise in HBM prices also played a role. According to foreign media, the price of HBM3 DRAM, the 'third-generation HBM,' has increased more than fivefold since 2023. For Nvidia, which manufactures AI chips, an increase in the price of the core component HBM inevitably raises development costs. This background strengthens the analysis that Nvidia is provoking competition.

Unclear Information Surrounding Nvidia

Recently, various unclear pieces of information surrounding Nvidia in the HBM market have raised suspicions about intentional competition provocation. It is analyzed that Nvidia is leaking only ambiguous information without directly establishing relationships between current and potential suppliers, thereby inducing competition to lower HBM prices. It is also reported that SK Group Chairman Chey Tae-won’s brief but urgent meeting with Nvidia CEO Jensen Huang in Silicon Valley on the 25th of last month is not unrelated to this.

Nvidia has been "testing" Samsung Electronics' industry-first developed HBM3E 12-stack product and has kept the possibility of supply open for over a month but has yet to make a clear announcement regarding supply. This is interpreted as a strategy to move Samsung Electronics. Samsung Electronics’ announcement to begin mass production of the HBM3E 12-stack product from the second quarter and take the lead first is difficult to explain without considering Nvidia’s lukewarm approach.

Technology Competition Also Provoked, Positive Evaluations Arise

As a side effect of price competition, 'technology competition' continues unabated, and some in the industry view this positively in the long term. Fundamentally, both Samsung Electronics and SK Hynix aim to enhance their technological capabilities to make HBM faster and cheaper. By gaining price competitiveness through Nvidia, they expect an overall increase in competitiveness in the market. This means they can turn an uncomfortable situation into an opportunity. Kyung Kye-hyun, President of Samsung Electronics’ Device Solutions (DS) Division, recently emphasized at an internal management briefing that the current moment is "a time when we must not miss the opportunity and must achieve a turnaround this year," adding, "B2B business using AI is about to become a reality. Before that, energy consumption must be minimized, memory capacity must continue to increase, and data processing speed must become much more efficient. Our company can solve these issues best." He also stressed that Samsung Electronics is the "only comprehensive semiconductor company capable of turnkey supply of customized AI semiconductors."

Jensen Huang, CEO of NVIDIA, is reported to have left a handwritten autograph on the next-generation high-bandwidth memory (HBM) HBM3E at the Samsung Electronics booth during the annual developer conference 'GTC 2024' held in San Jose, USA, last March. According to industry sources, Jinman Han, Executive Vice President and Head of Samsung Electronics DS Division Americas (DSA), shared a photo on his social media showing CEO Huang visiting the Samsung booth and posing with the staff present there. Photo by Jinman Han, Samsung Electronics EVP SNS capture.

In particular, he also posted a photo of CEO Huang's autograph on the HBM3E 12H (High·12-layer stacking) product displayed at the booth. [Image source=Yonhap News]

On the same day, Kwak No-jung, CEO of SK Hynix, announced that their HBM volume is sold out not only for this year but also for next year. Speaking at a press conference titled ‘AI Era, SK Hynix Vision and Strategy,’ he said, "We have secured industry-leading technological leadership in products such as HBM, silicon through-via (TSV)-based high-capacity DRAM, and high-performance enterprise solid-state drives (eSSD)."

Efforts to Reduce ‘Nvidia Dependency’

Fortunately, our companies are also making efforts to reduce dependency on Nvidia recently, which is viewed positively. They are trying to expand HBM supply channels through cooperation with companies other than Nvidia.

Samsung Electronics’ senior executives will attend the ‘Intel AI Summit’ held in Seoul on the 5th of next month. Intel CEO Pat Gelsinger is scheduled to deliver a speech at this event. There is a possibility that Gelsinger and Samsung Electronics executives will discuss AI accelerator development and the necessary HBM supply. Although Intel has developed its own AI accelerator, it reportedly holds only a 0.5% market share, indicating a need for a turning point. SK Hynix is enhancing its HBM technology proficiency and seeking new opportunities through new product development. It has signed a memorandum of understanding (MOU) for technological cooperation with Taiwan’s TSMC, the leading foundry, to jointly develop the sixth-generation HBM4 product.