Nvidia's 'memory bottleneck' worries Samsung, SK Hynix

Nvidia's latest earnings report, exceeding market expectations with a 106% year-over-year revenue increase to $96.221 billion for its second fiscal quarter, signals a robust demand for AI semiconductors that is expected to continue benefiting South Korean memory manufacturers like Samsung Electronics and SK Hynix.

The company's expansion of AI accelerator production is currently constrained by a shortage of high-bandwidth memory (HBM), a crucial component for AI chips. Nvidia's CFO, Colette Kress, indicated that this memory supply bottleneck could persist until at least the fourth quarter of fiscal year 2028, projecting it as a key factor limiting Nvidia's growth. This shortage, coupled with rising memory prices, has significantly increased the pricing power of memory suppliers.

“

The current memory supply shortage will act as a bottleneck for growth until at least fiscal year 2028.

This dynamic has led to a substantial revenue surge for Samsung and SK Hynix, even with only marginal increases in production volume. For instance, Samsung's memory business revenue jumped 61.5% in the second quarter compared to the previous one, while production volume saw a mere 0.16% increase. SK Hynix reported a similar trend, with a 50.9% revenue increase against a 10.7% rise in production.

“

Without the memory bottleneck, (revenue growth) would have been 100%.

Despite the immediate financial gains, the heavy reliance on U.S. tech giants and Nvidia's shipment volumes poses a risk. A slowdown in investment by major tech companies or doubts about the profitability of their AI investments could directly impact memory chipmakers. Furthermore, the increasing trend of hyperscalers developing their own chips to reduce dependence on Nvidia adds another layer of uncertainty.

The escalating memory prices, while boosting current profits for Samsung and SK Hynix, also raise concerns about the long-term expansion of the AI market. Higher costs for building AI servers could deter customer investments. Nvidia CEO Jensen Huang acknowledged this, stating that without the memory bottleneck, their revenue growth could have reached 100% instead of the projected 70% for the next year. SK Group Chairman Chey Tae-won echoed these concerns, calling current semiconductor prices "abnormal" and advocating for lower prices to ensure market growth and the sustainability of South Korea's semiconductor industry.

“

Semiconductor prices must fall. The current prices are abnormal. We must lower profit margins, increase supply, protect the market, and grow the market together for the South Korean semiconductor industry to be maintained and developed.