Expectations grow on Samsung's possible HBM3E chip supply to Nvidia

The Samsung logo is pictured during the inauguration of the Samsung Galaxy innovation space on the Champs-Elysees avenue in Paris, April 29. Reuters-Yonhap

Expectations are growing over Samsung Electronics' possible supply of fifth-generation high-bandwidth memory chips, or HBM3E, to Nvidia, upon a report on Wednesday that Samsung's eight-layer HBM3E has passed Nvidia's qualification tests.

Samsung denied the report, but industry officials believe that the Korean chip giant will likely get the green light to supply its advanced memory chips to Nvidia within this year. The stock market also interpreted the report as favorable, lifting Samsung's share price on the day.

Reuters reported that Samsung's eight-layer HBM3E has passed Nvidia's tests for use in its artificial intelligence (AI) processors, citing three unidentified sources. Following the approval, Samsung and Nvidia will soon sign a supply deal, and supplies would start by the fourth quarter of this year, Reuters reported, adding that Samsung's more advanced 12-layer HBM3E chips have yet to pass Nvidia's tests.

Samsung declined to comment on the report, but a company source said it is "incorrect," adding, "Not only 12-layer but also eight-layer HBM3E chips are still undergoing the tests."

Samsung Electronics' 12-layer HBM3E / Courtesy of Samsung Electronics

HBM vertically stacks DRAM chips to save space and power, thereby serving as a key component in graphics processing units (GPU) for AI services. Due to this, HBM products, particularly HBM3E chips, are believed to be the main revenue source for memory chip makers in the near future.

Nvidia's tests on Samsung's HBM chips have been a subject of keen interest in the IT industry. As the world's leading GPU supplier, Nvidia has not been receiving HBM chips from Samsung. Instead, Samsung's rival, SK hynix, has established itself as Nvidia's main HBM supplier.

Samsung said during its second-quarter earnings call on July 31 that its HBM3E sales are expected to grow quickly, accounting for 60 percent of total HBM sales by the fourth quarter.

During the earnings call, Kim Jae-joon, executive vice president of Samsung's memory chip division, said the company "will begin supplying eight-layer HBM chips to clients in the third quarter of this year" and that "the company has finished preparations to mass-produce 12-layer HBM3E, with plans to begin supply in the second half of this year."

The comments were interpreted as a hint that Samsung may begin supplying those chips to Nvidia in the near future.

Seen above is Nvidia CEO Jensen Huang's signature on Samsung Electronics' HBM3E 12H chip at the company's booth at the GTC 2024 in San Jose, California. This photo was posted to social media by Han Jin-man, executive vice president of Samsung Electronics Semiconductor Division America. Captured from Han's social media

If Samsung begins supplying its eight-layer HBM3E chips to Nvidia, it will bring a dramatic change to the landscape of the HBM market, which was dominated by SK hynix. Among the world’s three main HBM suppliers — Samsung, SK hynix and Micron — Samsung has the biggest production capacity.

“It is too early to be convinced about the approval of Samsung’s eight-layer HBM3E,” Hi Investment & Securities analyst Song Myung-seob said.

“However, it is assumed that Nvidia, which can meet its HBM demand with SK hynix’s supply for this year, will likely consider Samsung’s chips positively to prepare for the expected demand growth next year… In this case, this can result in intensified competition in the HBM sector, as well as an oversupply situation.”

Upon growing expectations, Samsung Electronics shares closed at 74,700 won, up 3.03 percent from a day earlier.