Challenging SK Hynix's dominant position! Morgan Stanley: By next year, Samsung will reclaim at least 10% of the HBM market

After a series of setbacks, Samsung is catching up and attempting to challenge SK Hynix's dominant position in the High Bandwidth Memory (HBM) chip market.

On July 30th, according to sources cited by the media, Samsung has made significant progress in seizing the HBM market, with one of its HBM3 chips receiving certification from the AI giant NVIDIA. Samsung expects that its next-generation HBM3 chip will also be approved within 2-4 months. Analysts at Morgan Stanley are also very bullish on Samsung's stock price, believing that by next year, Samsung will capture at least another 10% of the HBM market, leading to a substantial increase in revenue.

This is a long-awaited development for Samsung. It is reported that since 2023, Samsung has been striving to obtain certification from NVIDIA for products such as HBM3 and HBM3E.

Earlier this year, discussions arose in various media reports regarding Samsung's HBM not being validated by NVIDIA and Samsung's low HBM yield rate. Samsung also struggled to secure orders from NVIDIA. Currently, NVIDIA holds over 80% of the global AI GPU market share, making access to NVIDIA's HBM supply chain crucial.

However, Samsung's rival SK Hynix has always been NVIDIA's largest supplier of HBM chips. In the AI wave, NVIDIA is thriving, and SK Hynix's performance is also on the rise.

Despite being the largest memory chip manufacturer in the industry, Samsung lags behind SK Hynix, the world's second-largest memory manufacturer, in the HBM field. According to market research firm TrendForce, SK Hynix led the HBM market last year with a 53% market share, followed by Samsung Electronics (38%) and Micron (9%).

Nevertheless, Samsung is working hard to reverse this situation.

Morgan Stanley: By 2025, Samsung's HBM market share will increase by at least 10%

According to a report by Morgan Stanley, the HBM market size is expected to increase from $4 billion last year to $71 billion by 2027. The faster Samsung gains support from the AI giant NVIDIA, the more revenue it will generate from this growth.

"Investor sentiment towards Samsung may change soon, as the situation is rapidly improving," wrote Morgan Stanley analysts Shawn Kim and Duan Liu in a research report this month.

These two analysts have listed Samsung as their top stock pick because they believe that by 2025, Samsung's HBM market share will increase by at least 10%, resulting in an additional revenue of about $4 billion.

Currently, major tech giants such as Microsoft, Google, Amazon, Apple, and Meta are increasing their investments in AI, and the future demand for HBM is expected to surge. Analysts at Sanford C. Bernstein stated in a report in July that NVIDIA will continue to use HBM3E in almost all products until 2025, and even chip competitors will continue to use it by 2026.

According to detailed information in quarterly reports, Samsung has been producing HBM3 chips since the second half of last year. Sources say that Samsung has started supplying HBM3 to NVIDIA for its H20 chip

Changing the backward situation, Samsung replaced the semiconductor leader in one fell swoop

Samsung also replaced the semiconductor leader due to its lag in areas such as HBM. In May of this year, experienced Jun Young-hyun took on the responsibility of developing storage giants and selling HBM chips to NVIDIA.

It is reported that at that time, Samsung's HBM encountered heat dissipation and power consumption issues. Sources said that Samsung encountered trouble in solving the so-called thermal coupling problem. HBM is stacked from a group of DRAM chips, with the latest generation reaching a stack height of eight layers. Each layer generates a large amount of heat, which then cooperates with NVIDIA's GPU, which can reach 100 degrees Celsius. Without proper heat dissipation and cooling materials, there is a risk of the entire stack melting.

After Jun Young-hyun took over as the leader of Samsung's semiconductor, he actively sought solutions to the above problems. The 63-year-old executive convened a series of meetings to discuss technical details and identify the root cause of the problem.

Ultimately, Samsung modified the HBM design to address the heat dissipation and power consumption issues. Sources said that this led to Samsung's HBM3 receiving approval from NVIDIA.

Samsung stated that since Jun Young-hyun took over, the company has prioritized a culture of collective discussion and problem-solving. The company added that its HBM products have no issues with heat dissipation and power consumption, and have not been redesigned for specific customers.

"We have never seen Samsung in this situation before," said Jim McGregor, an analyst at research firm Tirias Research. "The industry and NVIDIA need Samsung more than anyone else, but they need Samsung to go all out."

"Dominant" SK Hynix does not slack off, Samsung's road is long and arduous

Currently, Samsung's competitor SK Hynix has not slackened. As the main supplier of NVIDIA's HBM chips, SK Hynix's stock price has surged by over 150% since the beginning of 2023, more than three times the performance of Samsung's stock price.

Last week, SK Hynix stated that it is accelerating the production of HBM3E products to achieve over 300% growth. The company also plans to start mass production of the next-generation 12-layer HBM3E chips this quarter and supply them to customers starting in the fourth quarter.

In addition, Micron Technology announced earlier this year that NVIDIA has approved its HBM3E chips for the company's AI devices. Under pressure from Micron and SK Hynix, Samsung is under great pressure.

However, analysts point out that Samsung has a significant advantage in terms of its financial resources and production capacity. Once it meets NVIDIA's approval standards, Samsung can quickly increase production to address the shortages that have plagued NVIDIA and other AI supporters.

Analyst Silverman said, "Micron and Hynix currently do not have the capacity to support the entire market." NVIDIA CEO Jensen Huang hopes to encourage all HBM suppliers because the market needs more supply. Insiders said, "NVIDIA is putting pressure on SK Hynix to increase supply, but with the production of HBM3E and the previous generation HBM3, the available capacity is close to saturation." Under the leadership of Jun Young-hyun, Samsung is making progress. The company has developed its own 12-layer HBM3E technology and is working hard to obtain approval from NVIDIA for this generation of chips as well as 8-layer HBM3E