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Mon, December 9, 2019 | 12:12
IT
Samsung's leadership in chip industry faltering
Posted : 2019-05-17 16:57
Updated : 2019-05-18 09:22
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Korea tech giant expected to see turnaround in 2nd half

By Baek Byung-yeul

Samsung Electronics has failed to recapture its former status as the world's largest semiconductor supplier from U.S. chip maker Intel for the second consecutive quarter due to its heavy reliance on the sluggish memory market.

According to data from industry tracker IC Insights, Friday, Samsung bore the brunt of price cuts of memory semiconductors such as DRAM and NAND flash chips with its sales down by 34 percent in the first quarter at $12.86 billion.

This was the biggest drop among the top 15 semiconductor companies.

Intel, a leader in the non-memory sector, recorded sales of $15.79 billion, slightly below the $15.83 billion it earned in the first quarter of 2018.

Samsung took the No.1 chip supplier position in 2017 and 2018 edging out Intel which held the position for 24 years from 1993 to 2016 thanks to soaring demand for memory chips for corporate servers and data centers.

Though the firm continued to break earnings records over the past two years, Intel replaced Samsung in the fourth quarter of 2018 after the Korean firm was hit by price cuts and sagging demand for memory chips.

"While Samsung held the full-year top post in 2017 and 2018, Intel is forecast to easily recapture the No.1 ranking for the full-year of 2019, a position it previously held from 1993 through 2016," IC insights reported.

"With the collapse of the DRAM and NAND flash markets in the past year, a complete switch has occurred. Samsung surpassed Intel by 23 percent in semiconductor sales in the first quarter of 2018 but Intel outperformed Samsung by 23 percent just a year later in the first quarter of 2019."

Samsung's heavy reliance on DRAM and NAND flash chips has been cited as the firm's major weak point.

Compared to the non-memory sector, the memory chip market is hard to predict as it tends to be heavily affected by volatility. The report added the big three memory chip makers ― Samsung, SK and Micron ― experienced "the extreme volatile nature of the memory market."

An industry analyst said Samsung is expected to see a turnaround in memory chips in the second half of 2019 on the back of a base effect.

"The business cycle of the DRAM market is forecast to see a turnaround starting in the third quarter of 2019 because of a reduced supply and increased demand," said Choi Do-yeon, an analyst at Shinhan Investment. "The profit volatility of DRAM will decrease thanks to a fall in inventory."

A Samsung Electronics official said that this is why the world's largest memory chip maker is making the bold move into the non-memory chip business.

"Samsung is trying to diversify its semiconductor portfolio to become a leader in the non-memory sector as well. By investing big, it plans to be less affected by market volatility," the official said.

Samsung has lagged behind in the non-memory sector which accounts for about 70 percent of the entire semiconductor market. With the aim of becoming the leader in not only memory chips but also non-memory semiconductors, it recently announced it will invest 133 trillion won in the latter and the foundry sector by 2030.


Emailbaekby@koreatimes.co.kr Article ListMore articles by this reporter








 
 
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