NVIDIA Throws Samsung A Lifeline: Orders Al Chips for The Chinese Market

NVIDIA has quietly approved Samsung’s advanced HBM3E memory chips for its AI processors, reports Bloomberg. The deal targets China’s booming AI market, sidestepping US export restrictions.

This partnership offers Samsung a foothold in NVIDIA’s $128 billion AI chip supply chain. Analysts call it a “strategic Band-Aid” for Samsung’s lagging AI memory business.

Samsung’s chips are reportedly less advanced than SK Hynix’s industry-leading HBM3E. NVIDIA’s approval, however, signals confidence in Samsung’s rapid catch-up efforts.

High-bandwidth memory (HBM) is critical for AI processors, enabling faster data transfer. NVIDIA’s pivot to Samsung reflects the urgency to bypass US-China technology trade barriers.

Samsung Scrambling for a Share in the AI Market

Samsung’s HBM3E chips cleared NVIDIA’s rigorous performance tests after multiple delays. The win follows a costly R&D sprint to match SK Hynix’s benchmarks.

The Korean giant spent $36 billion in 2024 upgrading AI memory production. Yet, its chip division profits plunged 47% last quarter amid manufacturing hurdles.

“Samsung is playing catch-up with cheaper, slightly slower chips,” a supply chain insider told Investing.com. Notably, NVIDIA’s order covers mid-tier GPUs for Chinese cloud providers.

Currently, Samsung’s massive investment focuses on expanding HBM3E output while slashing defect rates. Yield issues had previously plagued 20% of its HBM3 production, cites the EconoTimes.

SK Hynix Still Continues to Dominate

SK Hynix retains its 50% stranglehold on the HBM market, supplying NVIDIA’s flagship H200 GPUs. Its HBM3E chips outperform Samsung’s in speed and energy efficiency.

However, geopolitical tensions are reshaping supply chains. NVIDIA now seeks non-US partners like Samsung to bypass China trade barriers.

The partnership aims to fill a critical gap as Chinese firms stockpile AI components. Bernstein analysts predict China’s AI chip demand will triple by 2025.

Meanwhile, SK Hynix plans to invest $14 billion by 2028 to maintain its lead. Its HBM4 chips, launching in 2026, aim to widen the performance gap further.

Hope is On the Horizon for Samsung

The deal won’t immediately dethrone SK Hynix, but it is expected to stabilize Samsung’s AI ambitions. Its stock rose 2.3% on the news, though shares remained down 12% toward the end of last year.

The Korean tech titan must now prove it can scale production without yield issues. Past attempts saw 20% defect rates in HBM3 chips, per EconoTimes.

NVIDIA is currently diversifying its supply chain ahead of next-gen Blackwell GPU launches. The move hedges against SK Hynix’s limited production capacity.

On the other hand, Samsung is testing hybrid bonding technology to boost chip efficiency and yields. Success could trim costs and help reclaim market share from SK Hynix by 2025.

China’s Hunger for Innovation Reshaping the AI Battlefield

Chinese tech giants like Alibaba and Tencent are hoarding AI chips amid US sanctions. NVIDIA’s workaround with Samsung offers these firms a legal supply lifeline.

Samsung’s chips are 15% slower than SK Hynix’s but are priced 20% lower. This appeals to cost-sensitive Chinese startups scaling AI tools like chatbots.

“China’s AI sector is prioritizing availability over peak performance,” a Beijing-based analyst told Yahoo Finance. Local firms face shrinking access to cutting-edge Western technology.