Samsung to adopt chipmaking tech used by rival amid AI chip supply race

Samsung Electronics plans to use a chipmaking technology championed by rival SK Hynix, five people have said, as the world’s top memory chipmaker seeks to catch up in the race to produce high-end chips used to power artificial intelligence.
The demand for high bandwidth memory (HBM) chips has boomed with the growing popularity of generative AI. But Samsung, unlike peers SK Hynix and Micron Technology, has been conspicuous by its absence in any dealmaking with Nvidia to supply the AI chip leader with the latest HBM chips.

One of the reasons Samsung has fallen behind is its decision to stick with chipmaking technology called nonconductive film (NCF), which causes some production issues, while Hynix switched to the mass reflow molded underfill (MR-MUF) method to address NCF’s weaknesses, according to analysts and industry watchers.

Samsung, however, has recently issued purchase orders for chipmaking equipment that can be used with the MUF technique, three sources with direct knowledge of the matter have said.

“Samsung had to do something to ramp up its HBM (production) yields. … Adopting MUF technique is a little bit of swallow-your-pride type thing for Samsung, because it ended up following the technique first used by SK Hynix,” one of the sources said.

Samsung’s HBM3 chip production yields stand at about 10%-20% while SK Hynix has secured about 60%-70% yield rates for its HBM3 production, according to several analysts.

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The HBM3 and HBM3E, the newest versions HBM chips, are in hot demand. They are bundled with core microprocessor chips to help process vast amounts of data for generative AI applications.

Samsung is also in talks with material manufacturers, including Japan’s Nagase, to source MUF materials, one source said, adding that mass production of the high-end chips using MUF is unlikely to be ready until next year at the earliest, as Samsung needs to run more tests.

The three sources also said Samsung plans to use both NCF and MUF techniques for its latest HBM chip.

Samsung has said its internally developed NCF technology is an “optimal solution” for HBM products and would be used in its new HBM3E chips. “We are carrying out our HBM3E product business as planned,” Samsung said in a statement.

Nvidia and Nagase declined to comment. All sources spoke on condition of anonymity as the information is not public.

Samsung’s plan to use MUF underscores growing pressure it faces in the AI chip race, with the HBM chip market, according to research firm TrendForce, seen more than doubling this year to nearly $9 billion amid AI-related demand.

Competing technologies

Nonconductive-film chip manufacturing technology has been widely used by chipmakers to stack multiple layers of chips in a compact high bandwidth memory chipset, as using thermally compressed thin film helps minimize the space between stacked chips.

But there are often problems linked to adhesive materials as more layers are added and the manufacturing becomes more complicated. Samsung says its latest HBM3E chip has 12 chip layers. Chipmakers have been looking for alternatives to address such weaknesses.

SK Hynix successfully switched to the mass reflow molded underfill technique ahead of others, becoming the first vendor to supply HBM3 chips to Nvidia.

SK Hynix’s market share for HBM3 and more advanced HBM products for Nvidia is estimated to be above 80% this year, according to Jeff Kim, an analyst at KB Securities.

Micron joined the high bandwidth memory chip race last month, announcing that its latest HBM3E chip will be adopted by Nvidia to power the latter’s H200 Tensor chips that will begin shipping in the second quarter.

Samsung’s HBM3 series have not yet passed Nvidia’s qualification for supply deals, according to one of the four sources and another person with knowledge of the discussion.

Its setback in the AI chip race has also been noticed by investors, with its shares falling 7% this year — lagging SK Hynix and Micron, which are up 17% and 14%, respectively.