Changes in US Chip Policy enhance the Prospects for Samsung and SK hynix
The recent move by the United States to remove restrictions on Nvidia's AI chip sales to China is anticipated to greatly benefit South Korean chip manufacturers Samsung Electronics and SK hynix, especially in the high-bandwidth memory (HBM) sector. US Commerce Secretary Howard Lutnick announced that the government has authorized Nvidia to export its H20 graphics processing units (GPUs) to China.
This decision forms part of broader trade negotiations with Beijing focused on rare earth elements and aims to enhance China's reliance on American technology.
"We don't sell them our best items, nor our second-best, or even our third-best," Lutnick remarked, emphasizing that the H20 is Nvidia's "fourth-best" chip. In April, former President Donald Trump had prohibited H20 exports to China to restrict China's access to advanced US technology.
This export freeze left Nvidia with excess inventory, resulting in a $4.5 billion charge and a $2.5 billion decline in quarterly revenue. With exports resuming, the demand for HBM chips—which facilitate AI accelerators and high-performance servers by providing quicker data processing than traditional DRAM—is expected to recover.
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Samsung and SK hynix, major HBM suppliers for Nvidia, are likely to experience a favorable outcome. The H20 chip features both HBM3 and the newer HBM3E memory. While it may not be the best for training AI models, it is designed for inference tasks, a sector of AI that is currently growing rapidly. Samsung has been supplying HBM3 for the H20 since last year.
However, the previous export ban had a significant negative effect, leading to a 55.9 percent decrease in Samsung's operating profit year-over-year for the second quarter.
On the other hand, SK hynix, which currently has the highest market share in HBM and was the first to supply HBM3E to Nvidia, stands to benefit in the short term due to the reinstated H20 exports.
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Ryu Hyung-keun of Daishin Securities says, “It's a short-term positive development for the AI GPU and HBM sectors that Nvidia is now able to resume exports to China. SK hynix is expected to benefit in the near term from the resumption of H20 shipments."