Samsung Takes Strides as Apple Treads Lightly

In a previous article, we discussed how Apple had to tread carefully with the release of its AI feature, Apple Intelligence. In contrast, its main competitor Samsung is accelerating its efforts, leveraging the AI boom to fuel growth and innovation across its product lines.

Apple's AI Features Delay: A Calculated Move
Apple Inc. has postponed the release of its much-anticipated AI features, Apple Intelligence, due to a mix of strategic and external pressures. Initially set to launch with the iOS 18 and iPadOS 18 updates, these features have been delayed to allow Apple to refine the technology and address potential security concerns. The delay is significantly influenced by Elon Musk’s vocal opposition, who threatened to ban Apple devices from his companies if they integrate OpenAI's technology at the operating system level.
Musk's public threat underscores his deep mistrust in Apple's ability to manage AI securely. Despite Apple’s privacy-centric design promises, Musk's skepticism has added pressure on Apple to reconsider its immediate plans. This delay allows Apple to engage developers in early testing, ensuring a smooth release and maintaining its commitment to privacy and security amidst heightened scrutiny over AI technologies.

Samsung's Accelerated AI-Driven Growth
While Apple takes a cautious approach, Samsung Electronics is making significant strides, particularly in the semiconductor market. Samsung has forecasted robust demand for AI-driven chips in the latter half of the year, contributing to a more than 15-fold rise in its second-quarter operating profit. The company reported a 10.4 trillion won ($7.52 billion) operating profit in April-June, up from 670 billion won a year earlier, marking its highest operating profit since the third quarter of 2022.
This surge is fueled by rebounding semiconductor prices and explosive demand for high-end DRAM chips, such as high-bandwidth memory (HBM) chips used in AI chipsets and data center servers. Samsung’s second-quarter HBM revenue rose about 50% from the previous quarter, reflecting the increasing demand for AI-related applications.

Strong Financial Performance and Market Confidence
Samsung’s second-quarter revenue rose by 23% to 74 trillion won, with the chip division reporting a 6.45 trillion won profit, its highest since the second quarter of 2022. This growth is driven by the chip division’s recovery from a slump caused by weak post-pandemic demand for gadgets. The company expects AI servers to occupy a larger portion of the memory market as major cloud service providers and enterprises expand their AI investments.
Samsung’s share price rose 0.7% in morning trade, outpacing the benchmark index's 0.3% rise. The company’s strong financial performance and strategic positioning in the AI chip market have bolstered investor confidence.

Innovation in AI-Enabled Devices
Samsung is not only focusing on semiconductors but also expanding its AI-enabled device portfolio. Despite a drop in the mobile devices business’s second-quarter operating profit due to higher parts costs, Samsung expects overall demand for smartphones to increase in the second half of 2024. The company recently launched its latest AI-enabled flagship foldable phones and mobile accessories, including a health-monitoring ring, to compete with Apple in the premium smartphone segment.

Challenges and Opportunities
While Samsung is making significant progress, it faces challenges in meeting AI chip leader Nvidia’s standards for fifth-generation HBM chips, called HBM3E. However, Samsung is optimistic about achieving this target by the fourth quarter, provided its HBM3E chips pass Nvidia’s final approval by the third quarter. The company’s focus on HBM, server DRAMs, and server solid-state drives (SSDs) for AI applications indicates a strategic shift towards high-demand areas, even as conventional supply of PC and mobile memory chips remains constrained.

Strategic Implications for the Tech Industry
Samsung’s accelerated efforts in AI-driven growth contrast sharply with Apple’s cautious approach. While Apple’s delay reflects a measured strategy to ensure security and privacy, Samsung’s rapid advancements underscore its commitment to leveraging the AI boom to drive growth and innovation. This divergence in strategies highlights the dynamic nature of the tech industry, where companies must balance innovation with security, market demands, and competitive pressures.
As the AI landscape evolves, both Apple and Samsung’s approaches will shape their future trajectories and impact their competitive standing in the global tech market. Samsung's strides in AI-driven growth position it as a formidable competitor, while Apple's cautious strategy aims to maintain its reputation for security and user trust. The interplay between these strategies will be crucial in determining their success in the rapidly evolving tech landscape.