Samsung Electronics open to adding new chip production line to meet demand

Samsung Electronics released a statement dated Sunday, November 16, hinting that it will establish a new chip production line at its factory in Pyeongtaek, South Korea. According to the company, this new chip production line will enable it to keep pace with the growing demand prompted by the global expansion of AI.

The tech firm also mentioned that mass production is scheduled to commence in 2028. Apart from this, Samsung announced its intention to make further infrastructure investments to support this expansion.

Samsung believes that demand for its chips will continue to rise 

Samsung’s decision to develop a new chip production line follows its recent announcement of a 32.5% increase in its operating profit for the third quarter of the financial year. This rise resulted from the escalating demand for its computer memory chips. The tech company weighed in on the increase, expressing its belief that this demand will continue to surge due to the rapid adoption of AI among companies.

Additionally, reports revealed that the South Korean tech giant attained a new record for quarterly revenue. This revenue soared almost 9% to 86 trillion won, equivalent to around $60.4 billion, in the July-September period. Analysts investigated this rise and found that the sales growth of semiconductor products and mobile phones primarily drove it. 

Samsung anticipated that AI-driven demand would create more opportunities in the market in the coming months. Notably, the tech giant is known for excelling in component manufacturing and finished goods.

Meanwhile, another rival chipmaker that also experienced a surge in its operating profit is SK Hynix. The tech company reported its record operating profit of 11.4 trillion won, equivalent to $8 billion, attributing this rise to growth related to AI.

Contrastingly, Samsung’s operating profit reached an all-time high of about 12.2 trillion won ($8.6 billion) last quarter. This growth marked a notable 160% rise from the previous quarter. However, sources highlighted that the tech company encountered challenges with its semiconductor earnings at this time. These issues primarily arose from changes in inventory value and one-time costs resulting from China’s technology export limits. 

Still, Samsung’s semiconductor division yielded an operating profit of 7 trillion won ($4.93 billion) in the third quarter, reporting significant sales growth in high-bandwidth memory chips used for AI applications. 

In a statement, the company mentioned that it expects the semiconductor market to thrive due to continued investment in the AI ecosystem. Samsung also revealed that HBM3E, their cutting-edge high-bandwidth memory chips, are in mass production and are being sold to all relevant clients, while samples of HBM4, their next-gen product, are being sent to their key customers.

On the other hand, reports this month have drawn attention to the fact that Samsung has increased the prices of specific memory chips, which are currently in short supply due to intense global competition to construct AI data centers.

According to two sources with knowledge of the situation, this competition has escalated by 60% compared to September. This move comes after the world’s largest memory chipmaker decided to delay a formal announcement regarding pricing for supply contracts that were meant to be delivered in October. Typically, Samsung announces pricing details every month.

Samsung increases the price of certain memory chips

Several analysts commented on Samsung’s move to increase the prices for specific memory chips. They argued that increasing costs for memory chips, which are primarily used in servers, will likely create additional difficulties for large firms establishing data infrastructure.

According to analysts, these price hikes also threaten to raise the costs of other products, such as computers and smartphones, that use these chips.

Following their argument, many key server makers and data center developers began to realize that they would experience a shortage in the supply of these products.

During an interview, Tobey Gonnerman, the president of semiconductor distributor Fusion Worldwide, stated that “The price premiums being paid are extreme.” According to Gonnerman, contract prices for 32-gigabyte DDR5 memory chip modules from Samsung rose to $239 in November. This price is up from $149 in September. 

DDR memory chips play a significant role in the tech industry, assisting in enhancing performance in servers, computers, and various devices by temporarily storing data and facilitating fast data transfers and retrievals. 

Samsung has also reportedly increased the prices of its 16GB DDR5 and 128GB DDR5 chips by almost  50%, to be priced at $135 and $1,194, respectively. Moreover, the company has increased the prices of 64GB DDR5 and 96GB DDR5 by more than 30%, according to Gonnerman. 

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