Samsung set to eclipse Intel as world’s number one chipmaker
Samsung set to eclipse Intel as world’s number one chipmaker
Booming demand for memory chips propels Korean group to top of semiconductor pack
© Reuters
JUNE 27, 2017 by: Song Jung-a in Seoul
Samsung Electronics is expected to overtake Intel as the world’s largest chipmaker in the current quarter, for the first time ever, on the back of strong demand for chips for mobile devices and data servers.
Intel has been the number one chipmaker since 1993 after releasing the Pentium CPU (central processing unit) for personal computers. However, the rapid adoption of mobile devices around the world has enabled Samsung to close the gap in chip sales in recent years.
Samsung is estimated to have generated $15.1bn in chip sales for the April-June quarter, surpassing Intel’s estimated sales of $14.4bn, according to Nomura. Samsung is also expected to displace Intel as the industry leader for the full year, unless memory chip prices fall sharply in the second half. Samsung’s 2017 chip sales are forecast at $63.6bn, versus Intel’s estimated $60.5bn.
Analysts have pointed to surging prices of memory chips as the biggest reason for Samsung’s stronger position as consumers want more powerful smartphones and other internet-connected devices.
Samsung is the world’s largest maker of memory chips, which are essential for all smartphones, tablets, personal computers and servers. Samsung also makes its own application processors for smartphones and produces processors designed by Apple and Qualcomm, while Intel has struggled to break into mobile.
“In the mobile era, demand for D-Ram [a type of memory chip] and SSDs [solid state drives] has surged, boosting their prices since last year amid tight supply,” said CW Chung, an analyst at Nomura. “The memory chip market has grown bigger than the CPU market.”
Intel is good at making the CPU chips that power personal computers. Unfortunately for the US firm, consumer demand is sliding for these devices.
Average selling prices of D-Ram chips jumped 25 per cent in the first half of this year from the same period last year, while those of NAND flash memory chips also rose about 15 per cent, according to Nomura. Mr Chung expected their prices to continue to rise in the third quarter.
Nomura’s prediction is shared by the market researcher IC Insights. Analysts expect Samsung to maintain its lead over Intel and other chipmakers in the second half as Apple’s new iPhone launches later this year, which will boost memory chip demand. Meanwhile, enterprise SSD storage demand keeps increasing with companies building more data centres.
“Samsung is likely to remain on top for a while as long as the memory chip supercycles continues,” said Kim Young-woo, analyst at SK Securities. “Demand for server D-Ram and graphic D-Ram is so strong there are supply shortages.”
Samsung’s semiconductor division is also forecast to have made more profit than Intel in the second quarter, with Nomura estimating its operating profit for the April-June quarter at $6.6bn. This completely eclipses Intel’s estimated operating profit of $3.9bn.
For the full year, operating profit for Samsung’s chip division is forecast at $28.5bn versus Intel’s estimated $17.6bn. Samsung is scheduled to present its quarterly earnings guidance on July 7.
Memory chip producers are increasing their capital spending this year to ramp up capacity, riding booming demand for memory chips, but analysts say supply is likely to remain tight for the rest of this year, given stronger demand. Samsung is expected to increase its 2017 spending on semiconductors by 11 per cent to $12.5bn, while its cross-town rival SK Hynix plans to increase its capex by 16 per cent to $6bn, according to IC Insights.
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