Samsung joins the HBM 3e battle, victory or defeat lies in HBM 4

If Samsung's HBM3e is certified by NVIDIA, how will it disrupt the HBM market competition?

According to recent reports from the media, Samsung Electronics has already passed or is about to pass NVIDIA's HBM3e certification, and is expected to start supplying NVIDIA in the next quarter or the fourth quarter.

Bank of America analyzed the impact of Samsung's HBM3e certification in a report on Tuesday, stating that despite Samsung making some progress, SK Hynix, with its market leadership and high profit margins, is expected to maintain strong growth in the coming years, with a focus on the development progress of HBM4 in the future.

Due to SK Hynix's market leadership, it is expected that Samsung's supply of HBM3e to NVIDIA will have a relatively small impact on SK Hynix's earnings in 2024/25;

However, if Samsung's HBM4 certification is successful, it will have a significant negative impact on Hynix's earnings in 2026, but the current success rate is low.

Bank of America stated:

Samsung may confirm this news at the second quarter earnings call on July 31. We expect Samsung's HBM3e sales in 2024 and 2025 to be $500 million and $2.4 billion, accounting for 10% and 34% of total HBM sales.

Although Samsung will start shipping HBM3e to NVIDIA in the third or fourth quarter, sales may not increase significantly in the short term, and SK Hynix's market share in the HBM market in 2025 will remain above 50%.

Bank of America's analysis shows that SK Hynix's HBM profit margin is higher than Samsung's:

In 2025, SK Hynix will receive over 60% of orders for NVIDIA's Blackwell GPU, while Samsung currently dominates in HBM2e and GDDR6. In terms of operating profit margin for HBM, Samsung is around 40%, while Hynix is around 60%, with HBM3e prices and profit margins higher than HBM2e.

Bank of America further outlined three possible scenarios and their potential impact on SK Hynix's profits:

1. Successful certification of Samsung's HBM3e: Samsung obtains NVIDIA certification in the third or fourth quarter of 2024, consistent with our current forecast, with no impact on Hynix's earnings in 2024/25.

2. Failure of Samsung's HBM3e certification: A single-digit percentage impact on Hynix's earnings in the second half of 2024 and 2025, as Hynix's market leadership is already established, and NVIDIA will adjust prices and shipments in 2025.

3. Successful certification of Samsung's HBM4: If the hybrid bonding technology (16-layer DRAM chip stacking without non-conductive film) is successfully used to launch HBM4, it will have a significant negative impact on Hynix's earnings in 2026, but the current success rate is low.

Overall, Bank of America expects the global HBM market to continue growing, mainly driven by SK Hynix's HBM3 and HBM3e.

Global HBM sales are expected to increase from $1.6 billion in 2023 to $26.6 billion in 2027, with an annual growth rate of 59%

SK Hynix has started mass production of HBM3e in the first quarter of 2024 and plans to research and mass produce HBM4 in 2025, with HBM3e expected to account for 24% of total DRAM sales in 2024.

Samsung's contribution to HBM3e and HBM4 is expected to remain low in 2024-25. If Samsung's HBM3e certification fails, it will provide SK Hynix with an opportunity to increase market share. In addition, there is still uncertainty about Samsung's HBM4 manufacturing yield until 2026.