As Lisa Su, the CEO of AMD, visits Korea for a meeting with Samsung Electronics Chairman Lee Jae-yong, Samsung Electronics, which has become a "super-subcontractor" amid a global shortage of memory semiconductors, has secured favorable terms in negotiations with AMD. Just two years ago, Samsung Electronics was courting AMD to supply high bandwidth memory (HBM), but the situation has since flipped. Now AMD has to cling to Samsung Electronics, which has one of the industry's largest production capacities, to procure advanced memory.
According to Samsung Electronics on the 18th, the two companies signed a memorandum of understanding (MOU) to expand cooperation in next-generation artificial intelligence (AI) memory and computing technologies. On the same day, Su met Jun Young-hyun, head of the DS division (vice chairman) at Samsung Electronics, at the Pyeongtaek campus to discuss specific collaboration items. While details were not specified, it is presumed that in exchange for Samsung Electronics increasing supplies of state-of-the-art HBM to AMD, a condition was attached for Samsung Foundry to produce a portion of AMD's advanced AI chips.
◇ Semiconductor landscape shift that brought Lisa Su to visit
Su has held a long tenure since becoming head of AMD in 2014, credited with reviving the then-faltering company. But in recent years, as the server- and PC-centered central processing unit (CPU) market has rapidly pivoted toward data center AI chips, AI Semiconductor has become AMD's largest revenue source and future growth engine. While AMD is cited as a realistic "No. 2 contender" capable of challenging Nvidia, a number of tasks lie ahead.
To narrow the performance gap with Nvidia, AMD must strengthen not only its AI Semiconductor design capabilities but also its supply chain to scale up. However, the prevailing view is more negative at present. AMD's first-quarter guidance this year is $9.8 billion (14.5598 trillion won), a 5% decline from the previous quarter. Following the announcement, major foreign media including Reuters pointed out issues with the qualitative level and profitability of the AI Semiconductor business despite sales growth.
AMD urgently needs both qualitative and quantitative growth in its AI Semiconductor business. It must chase Nvidia, which holds a dominant position in the AI Semiconductor industry, while also facing threats from the rise of custom chip (ASIC) design firms such as Broadcom. From AMD's standpoint, sustained growth is possible only if it can supply higher-performance chips in large volumes to big tech companies including OpenAI, Meta, and Microsoft (MS).
Industry consensus holds that while AMD's MI-series AI Semiconductors have achieved a certain level of performance, they lag Nvidia in economies of scale. However, securing HBM, which plays a crucial role in AI chip performance, remains difficult. That is because Nvidia, the "whale" buyer, is absorbing a significant portion of the most advanced HBM production capacity at Samsung Electronics and SK hynix.
The reason Su came directly to Samsung Electronics is that Samsung is the corporations that can supply the highest-performing HBM in the largest quantities in the industry. In particular, in sixth-generation HBM (HBM4) for AMD's flagship AI chip this year, the "MI400," Samsung Electronics is considered technologically the most advanced. Notably, Samsung has pushed HBM4 performance above standard levels, giving it a maximum performance edge over competitors.
◇ TSMC-loyal AMD to expand collaboration with Samsung Foundry
Samsung Electronics holds more cards at the negotiating table with AMD. Nvidia, the industry's largest buyer, has already requested large-scale deliveries, and companies like Broadcom are steadily increasing purchases of HBM and high-performance server DRAM to fulfill orders from U.S. big tech. Even beyond AMD, major customers are lining up to buy chips at a premium. Inside and outside Samsung, the analysis is that Samsung Electronics ultimately leveraged HBM to secure more favorable terms in negotiations with Su.
While expanding its HBM customer base, Samsung has also been able to tighten its pursuit of Taiwan's TSMC in foundry (contract chip manufacturing). AMD is counted among TSMC's most loyal customers. As of early this year, AMD disclosed that it manufactures all chips on 7-nanometer and below advanced nodes through TSMC. While Qualcomm and Nvidia have outsourced flagship chips not only to TSMC but also to Samsung Electronics, AMD has effectively produced an overwhelming majority of its chips centered on TSMC. Some older-node chips have also used GLOBALFOUNDRIES Inc. as a supplement, and there had been virtually no meaningful collaboration with Samsung.
A semiconductor industry official said, "Cooperation between AMD and Samsung Foundry has been one of the consistently discussed scenarios since last year, when signs of a memory supply shortage began to appear, and discussions have been ongoing among working-level staff," adding, "Through this meeting between Chairman Lee Jae-yong and CEO Lisa Su, the two companies' semiconductor contract manufacturing partnership has gained further momentum."