Chipped leadership
Samsung concerned as Toshiba closes in on NAND flash lead
By Kim Yoo-chul
Staff reporter
Samsung Electronics, the world's largest maker of both DRAM and NAND flash memory chips, is watching its rivals gaining fast in the rear-view mirror.
But it isn't shy about using its size and wallet to beat down competitors through brute force if need be. However, it now appears that Japanese rival, Toshiba, which is making some aggressive investments of its own, has no intention of backing down.
Industry watchers wonder whether Samsung has become a victim of its own success, as the company seems to be seeing diminished effects from spending on chips and its No. 1 spot looks like it could be disputed.
"Samsung isn't the only major chipmaker bold enough to make massive capital investments. The favorable market has rival makers spending more to improve production and enhance technologies," said Park Hyun, an analyst at Prudential Investment.
Samsung already sees Toshiba inching up the ladder. Toshiba, the No. 2 NAND flash maker, has visibly closed its gap with Samsung in NAND sales, according to a recent report by iSuppli.
The U.S.-based market research firm said Toshiba had a better first quarter this year than its Korean rival, adding nearly 3 percentage points in market share compared to a year earlier. Samsung, on the other hand, saw its share drop by 1.3 percentage points.
A separate study by DRAMeXchange said the Japanese company saw a growth of 18.4 percent in sales year-on-year for the Jan. to March period, compared to Samsung’s 14.2 percent increase.
"It's interesting that Toshiba narrowed the market gap. The Japanese firm, which owns key technologies in NAND-type chips, could gain further on Samsung’s lead during the second quarter, as it appears to be receiving more orders from Apple and other big set-makers instead of Samsung," said a high-rank industry official, who didn’t want to be named.
Toshiba is planning to build a fifth manufacturing facility at its Yokkaichi plant in central Japan to boost its NAND flash production capacity.
A Samsung spokesman declined to comment on how much the company will spend to improve its NAND capabilities, though market watchers speculate that the company will spend 3 trillion won (about $2.5 billion) on the segment this year.
Samsung plans to invest 11 trillion won in its semiconductor business over the course of this year, including 9 trillion won in memory chips.
"We are alerted over the decline in shares. We need to be more aware of our once cash-strapped rivals mounting an attempt for a serious comeback," a Samsung official said.
DRAM lead appears safe
Although Toshiba is making things interesting in the NAND flash market, Samsung’s leadership in DRAMs appears to be safer.
According to a U.S.-based consulting firm, Gartner, Samsung led the DRAM market by a considerable margin during the first quarter, with Korea's Hynix Semiconductor and Japan's Elpida Memory coming in second and third, respectively.
Samsung's global share was over 32 percent, compared to Hynix’s 21 percent, Gartner said.
Although Samsung's lead in DRAMs looks untouchable, Hynix is more vulnerable to be overtaken by smaller rivals, especially a group of Taiwanese makers that are gaining quickly.
Most industry watchers agree that the immediate outlook for both NAND flash and DRAM markets seems safe.
The sales of consumer electronics products and mobile phones, unleashed by the global smartphone boom, continue to remain strong, despite the economic uncertainties that are clouding Europe.
"A shortage of DRAM chips is anticipated," said Lee Ka-keun, an analyst at IBK Securities.
"Slowed manufacturing capability and the lack of capital expenditure over the past two years, combined by a hot personal computer market, have resulted in creating a very positive environment in terms of DRAM prices."