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Exclusive: Samsung will employ chip fabrication tech preferred by SK Hynix as AI chip competition heats up, sources say

People walk by a Samsung Electronics exhibit at CES 2024, an annual consumer electronics trade show, in Las Vegas, Nevada, U.S. January 9, 2024

SEOUL, March 13 (mod1s) - Samsung Electronics (005930.KS), opens new tab wants to employ a chip producing method championed by competitor SK Hynix, five individuals said, as the world's top memory chipmaker strives to catch up in the battle to develop high-end chips needed to fuel artificial intelligence. 

The need for high bandwidth memory (HBM) processors has exploded with the rising popularity of generative AI. But Samsung, unlike rivals SK Hynix (000660.KS), opens new tab and Micron Technology (MU.O), opens new tab, has been notable by its absence in any dealmaking with AI chip leader Nvidia (NVDA.O), opens new tab to provide newest HBM chips.

One of the reasons Samsung has fallen behind is its decision to stick with chip making technology called non-conductive film (NCF) that causes some production issues, while Hynix switched to the mass reflow molded underfill (MR-MUF) method to address NCF's weakness, according to analysts and industry watchers. 

Samsung, however, has recently submitted purchase orders for chipmaking equipment suited to handle MUF method, three individuals with firsthand knowledge of the situation said.

"Samsung has to do something to boost up its HBM (production) yields ... adopting MUF technology is a little bit of swallow-your-pride kind thing for Samsung, since it ended up following the approach initially employed by SK Hynix," one of the individuals said. 

Samsung stated its NCF technology is a "optimal solution" for HBM products and will be utilized in its new HBM3E chips. "We are carrying out our HBM3E product business as planned," Samsung said in response to Reuters' questioning on the report.

After the report was published, Samsung released a statement claiming "rumours that Samsung will apply MR-MUF to its HBM production are not true". 

The HBM3 and HBM3E are the newest generations of high bandwidth memory chips that are combined with core microprocessor chips to assist handle huge quantities of data in generative AI. 

Samsung's HBM3 chip manufacturing yields are at roughly 10-20%, underperforming SK Hynix that has secured about 60-70% yield rates for its HBM3 production, according to multiple experts.

According to one of the sources, Samsung is already in negotiations with material makers, including Japan's Nagase (8012.T), opens new tab, to get MUF materials. But commercial manufacturing of the high-end chips employing MUF is unlikely to be ready until next year at the earliest, since Samsung has to do additional testing, the source noted. 

The three sources, cited above, also indicated Samsung aims to employ both NCF and MUF approaches for its newest HBM chip. 

All individuals spoke on condition of anonymity since the information is not public.
Nvidia and Nagase refused to comment. 

Any move by Samsung to employ MUF would emphasize the mounting pressure it faces in the AI chip race, with the HBM chip market, according to research company TrendForce, likely to more than quadruple this year to about $9 billion on AI-related demand. 

NCF VERSUS MUF 

The non-conductive film chip manufacturing process has been extensively employed by chipmakers to stack many layers of chips in a compact high bandwidth memory chipset, since employing thermally compressed thin film helps decrease space between stacked chips. 

But there are typically challenges relating to adhesive materials as production grows harder as additional layers are added. Samsung said its newest HBM3E chip has 12 chip layers. Chipmakers have been seeking for options to solve such problems. 

SK Hynix successfully converted to the bulk reflow molded underfill technology ahead of others, becoming the first manufacturer to ship HBM3 chips to Nvidia. 

SK Hynix's market share in HBM3 and more sophisticated HBM products for Nvidia is expected at around 80% this year, according to Jeff Kim, an analyst at KB Securities. 

Micron entered the high bandwidth memory chip battle last month, saying that its newest HBM3E chip would be adopted by Nvidia to power the latter's H200 Tensor processors which will begin delivering in the second quarter. 

Samsung's HBM3 series have not yet cleared Nvidia's certification for supply arrangements, according to one of the four people and another person with knowledge of the debate. 

Its loss in the AI chip competition has also been recognized by investors, with its shares down 7% this year, underperforming SK Hynix and Micron who are up 17% and 14%, respectively. 

On Wednesday, SK Hynix shares plummeted 2%, while Samsung jumped 1%, surpassing a 0.4% advance in the overall market (.KS11), opens new tab.


Source: https://www.reuters.com/

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