The world’s two largest memory chipmakers signal demand weakness may have bottomed out
A technician holds a semiconductor wafer at a manufacturing plant.
Ponywang | E+ | Getty Images
The recent earnings calls of the world’s two largest memory chipmakers signaled that weak demand may have finally bottomed out.
Samsung’s operating profit in the third quarter jumped 262.6% as compared to the second quarter. This followed a 85.15% drop in first quarter operating profit from the previous quarter and a small 4.68% improvement in second-quarter operating profit from the first quarter.
SK Hynix in its quarterly report said that its dynamic random-access memory business returned to profit in the third quarter, after losses in the first two quarters of this year.
“One of the big drivers of memory price recovering is industry-wide supply reduction and thus falling inventories,” James Lim, senior research analyst at Dalton Investments, told CNBC.
“Inventories at personal computer and mobile customers seem to have come down a lot and very low memory prices tend to induce restocking or having more memory content per device,” said Lim.
The South Korean companies are the world’s two largest makers of DRAM chips, according to data from market research firm TrendForce, with U.S.-based Micron trailing in third place. Such memory chips are found in consumer devices such as laptops and smartphones.
“We received numerous purchase inquiries amid widening awareness of the industry reaching a bottom, following the industry-wide production cuts,” Samsung said in its earnings report last week. Chipmakers have been running down excess inventories by scaling back production.
During the pandemic, companies stockpiled memory chips to meet record electronics demand, but were left with excess inventory when that pressure eased. Inflation has caused consumers to rein in spending and cut back on purchases of consumer devices, driving down demand and prices for memory chips.
Kazunori Ito, director of research at Morningstar, said that “earnings calls confirmed that the memory industry has bottomed out as expected.”
“DRAM average selling prices, or ASPs, rose by midsingle digits for Samsung and 10% for SK Hynix, sequentially, and it was the first time in eight quarters that Samsung experienced a price increase,” Ito said in a Nov. 1 report.
“We have made minor adjustments to our earnings forecasts for South Korean memory suppliers,” Ito said. The financial services firm added that Samsung’s shares are “undervalued” while SK Hynix’s shares “have about 18%-20% upside to our fair value estimate.”
Other chipmakers have also projected strong outlooks.
The world’s largest contract chipmaker Taiwan Semiconductor Manufacturing Company exceeded analysts’ expectations and predicted the worst could soon be over for the chip industry. TSMC makes the most advanced processors for companies like Apple and Nvidia based on Arm‘s architecture.
U.S.-based Qualcomm also gave a strong forecast for the current quarter, pointing to a chip recovery. Qualcomm makes the processors at the heart of most high-end Android devices and many lower-end phones as well.
“Although inventory levels peaked in mid-2023, they are still at the high levels, especially for NAND [flash memory],” Ito of Morningstar said.
NAND is another important memory chip that often works together with DRAM in PCs, servers and smartphones. It stores data but does not require power like DRAM.
“As a result, memory suppliers are expected to continue maintaining lower capacity utilization and to remain cautious about increasing production capacity next year, which should be favorable for memory prices due to limited supply,” Ito said.
TrendForce said it expects memory suppliers to continue “scaling back production of both DRAM and NAND Flash in 2024,” in particular in the “financially struggling NAND Flash sector.” The research firm also projected DRAM and NAND Flash demand to increase by 13% and 16% respectively in 2024.
AI boom to uplift profits
In the third quarter, strong demand for advanced, high-performance chips in generative AI has helped offset a slowdown for chips found in computers and smartphones, SK Hynix said in its earnings report.
“On servers, AI demand has been another strong driver,” said Lim of Dalton Investments.
ChatGPT and other large language models need a lot of advanced memory chips, which enable such generative AI models to remember details from past conversations and user preferences in order to generate humanlike responses.
“DRAM business … is expected to continue to improve along with the generative AI boom. The NAND flash business, which continues to suffer losses, is also showing signs of improvement,” SK Hynix said in a statement.
On the outlook for memory demand, Samsung said it expects fourth-quarter demand to pick up with year-end promotions, new product launches by its major customers as well as strong demand for generative AI.
Technology
Cognition to buy AI startup Windsurf days after Google poached CEO in $2.4 billion licensing deal
In this photo illustration, a man seen holding a smartphone with the logo of US artificial intelligence company Cognition AI Inc. in front of website.
Timon Schneider | SOPA Images | Sipa USA | AP
Artificial intelligence startup Cognition announced it’s acquiring Windsurf, the AI coding company that lost its CEO and several other senior employees to Google just days earlier.
Cognition said on Monday that it will purchase Windsurf’s intellectual property, product, trademark, brand and talent, but didn’t disclose terms of the deal. It’s the latest development in an AI talent war, as companies like Meta, Google and OpenAI fiercely compete for top engineers and researchers.
OpenAI had been in talks to acquire Windsurf for about $3 billion in April, but the deal fell apart, and Google said on Friday that it hired Windsurf’s co-founder and CEO Varun Mohan. Google is paying $2.4 billion in licensing fees and for compensation, as CNBC previously reported.
“Every new employee of Cognition will be treated the same way as existing employees: with transparency, fairness, and deep respect for their abilities and value,” Cognition CEO Scott Wu wrote in a memo to employees on Monday. “After today, our efforts will be as a united and aligned team. There’s only one boat and we’re all in it together.”
Cognition didn’t immediately respond to CNBC’s request for comment. Windsurf directed CNBC to Cognition.
Cognition is best known for its AI coding agent named Devin, which is designed to help engineers build software faster. As of March, the startup had raised hundreds of millions of dollars at a valuation of close to $4 billion, according to a report from Bloomberg.
Both companies are backed by Peter Thiel’s Founders Fund. Other investors in Windsurf include Greenoaks, Kleiner Perkins and General Catalyst.
“I’m overwhelmed with excitement and optimism, but most of all, gratitude,” Jeff Wang, the interim CEO of Windsurf, wrote in a post on X on Monday. “Trying times reveal character, and I couldn’t be prouder of how every single person at Windsurf showed up these last three days for each other and for our users.”
Wu said that the acquisition ensures all Windsurf employees are “treated with respect and well taken care of in this transaction.” All employees will participate financially in the deal, have vesting cliffs waived for their work to date and receive fully accelerated vesting for their, according to the memo.
“There’s never been a more exciting time to build,” Wu wrote.
WATCH: Google snatches Windsurf CEO after OpenAI deal dissolves
Meta CEO Mark Zuckerberg looks on before the luncheon on the inauguration day of U.S. President Donald Trump’s second presidential term in Washington on Jan. 20, 2025.
Evelyn Hockstein | Reuters
Meta on Monday said it has removed about 10 million profiles for impersonating large content producers through the first half of 2025 as part of an effort by the company to combat “spammy content.”
The crackdown is part of Meta’s broader effort to make the Facebook feed more relevant and authentic by taking action against and removing accounts that engage in “spammy” behavior, such as content created using artificial intelligence tools.
As part of that initiative, Meta is also rolling out stricter measures to promote original posts from creators, the company said in a blog post.
Facebook also took action against approximately 500,000 accounts that it identified to be engaged in inauthentic behavior and spam. These actions included demoting comments and reducing distribution of content, which are intended to make it harder for these accounts to monetize their posts.
Meta said unoriginal content is when images or videos are reused without crediting the original creator. Meta said it now has technology that will detect duplicate videos and reduce the distribution of that content.
The action against spam and inauthentic content comes as Meta increases its investment in AI, with CEO Mark Zuckerberg on Monday announcing plans to spend “hundreds of billions of dollars” on AI compute infrastructure to bring the company’s first supercluster online next year.
This mandate comes at a time when AI is making it easier to mass-produce content across social media platforms. Other platforms are also taking action to combat the increase of spammy, low-quality content on social media, also known as “AI slop.”
Google’s YouTube announced a change in policy this month that prevents content that is mass-produced or repetitive from being eligible for being awarded revenue.
This announcement sparked confusion on social media, with many users believing this was a reversal on YouTube’s stance on AI content. However, YouTube clarified that the policy change is aimed at curbing unoriginal, spammy and repetitive videos.
“We welcome creators using AI tools to enhance their storytelling, and channels that use AI in their content remain eligible to monetize,” said a spokesperson for YouTube in a blog post to clarify the new policy.
YouTube’s new policy change will take effect on Tuesday.
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