Buoyed by a surge in demand driven by artificial intelligence (AI), Samsung Electronics set a record for quarterly memory sales, while also expressing confidence in its HBM (high bandwidth memory) business, where it had ceded leadership to a rival. The foundry (contract chip manufacturing) business, long considered a weak spot after posting multitrillion-won losses every quarter, has begun a rebound on the back of its advanced 2-nanometer process (1 nanometer is one-billionth of a meter) and major orders from companies such as Tesla.
Samsung Electronics said on its third-quarter earnings conference call on the 30th that "hardware investment by data center operators continues to increase as competition to secure AI infrastructure intensifies," adding, "Demand for server memory related to AI is steadily rising and has significantly outstripped supply in the industry."
◇ Unprecedented boom in memory… Starts supplying HBM3E to Nvidia
Samsung Electronics said in its earnings announcement that in the third quarter, the Device Solutions (DS) institutional sector in charge of the semiconductor business posted 33.1 trillion won in sales and 7 trillion won in operating profit. That is a dramatic rebound from operating profit of 400 billion won in the second quarter.
The surprise results that the market did not expect were led by the memory division, which set a new quarterly sales record. The foundry business also helped the rebound by improving utilization and cutting its operating loss by more than half compared with the previous quarter (an operating loss of 2.58 trillion won). The securities industry estimates the memory business generated a profit of around 7.4 trillion won, while the System LSI and foundry businesses posted about 700 billion won in operating losses.
Expecting the AI Semiconductor boom to continue for some time, Samsung Electronics aims to boost profitability by focusing on high-value products such as HBM, where orders are pouring in. While Samsung Electronics did not name specific customers such as Nvidia by name, it said, "HBM demand is increasing faster than supply, and we are expanding mass-production sales of HBM3E (5th-generation HBM) to all customers." Having begun supplying HBM3E to Nvidia after multiple failed bids, the company has joined the supply chains of leading AI chip players, including big-ticket customer AMD and big tech firms building their own AI chips. On the back of this demand, third-quarter HBM bit sales volume expanded to the mid-80% range compared with the previous quarter.
◇ Betting on a turnaround with HBM4… "Next year's production plan already backed by demand"
Confidence in HBM4 (6th-generation HBM), a next-generation product, was even more pronounced. Samsung Electronics said, "HBM4 development is already complete and samples have been shipped to all customers, and we are ready for mass-production shipments in line with customer schedules." It added, "We have drawn up a plan to significantly expand HBM production next year compared with this year, and we have already secured the customer demand for this plan," and said, "We will actively execute investments needed to expand 1c-nanometer capacity, and as additional customer requests continue to come in, we are internally reviewing the potential to increase HBM production."
The company also expressed confidence in its technological edge. Samsung Electronics said, "As the competition for GPU (graphics processing unit) performance has intensified among customers recently, they are changing their plans and demanding higher-performance HBM4," adding, "From the start of HBM4 development, we preemptively reflected these requirements, and the samples currently delivered to customers can fully meet performance of 11 Gbps or higher at low power." HBM competitors SK hynix and Micron are also competing with an 11 Gbps performance target, but Micron is reportedly having difficulty meeting this specification.
As a result, the industry expects Samsung Electronics' market share to expand significantly next year when HBM4 enters full-scale supply. According to market research firm Counterpoint Research, Samsung Electronics ranked third with a 17% share in the global HBM market in the second quarter of this year, but is projected to secure about a 30% share next year based on HBM4 mass production.
◇ Foundry eyes revival with 2-nanometer process and Tesla orders
Alongside the memory business, the foundry business, the other pillar of the DS institutional sector, signaled a rebound by pushing its cutting-edge 2-nanometer process. Samsung Electronics said, "In the third quarter, we began mass production of the first product applying the first-generation 2-nanometer process and achieved a record-high order backlog centered on advanced processes." The product is known to be Samsung's in-house mobile AP (application processor) "Exynos 2600," which is expected to be installed in the Galaxy S26 series slated for release early next year.
With the recent addition of Tesla, the electric-vehicle company led by Elon Musk, as a major customer, expectations for a foundry rebound are rising further. In the second half of this year, Samsung Electronics signed one of the largest contracts with Tesla for a single customer in the institutional sector of semiconductors. Tesla signed a foundry order for its in-house AI Semiconductor chip "AI6" worth about 23 trillion won, and included Samsung Electronics in the development of "AI5," which it had initially planned to entrust only to TSMC.
To carry its rebound momentum into next year, Samsung Electronics plans to focus on securing advanced process technologies in both DRAM and foundry. Samsung Electronics said, "For DRAM, we will focus on mass production of HBM4 based on differentiated performance while increasing the sales share of high-value products such as DDR5 for AI, LPDDR5x, and GDDR7," adding, "For NAND, we will strengthen sales of high-value products such as server SSDs based on advanced processes and high-capacity quad-level cell (QLC), while in foundry we will focus on mass production of new 2-nanometer products and HBM4 base dies, and will fully ramp up the Taylor fab in the United States starting next year."