Samsung squeezing Intel

US chip giant realigning SSD strategy

By Kim Yoo-chul

Samsung Electronics is hot on the heels of Intel, the world’s No. 1 chipmaker, over solid state drives (SSD). The pressure is strong enough to force Intel to change its market strategy.

SSD is the next-generation storage technology replacing hard disk drives (HDD).

The world’s biggest semiconductor firm, Intel is simplifying its logistics and procurement channels for SSDs in Korea ― after its years-long dual-partner strategy has failed without yielding big benefits.

The Suwon, Gyeonggi Province-based Samsung last year came closer to challenging Intel’s leadership position in the global chip market than any company had in more than a decade, according to data from the market research firm IHS iSuppli.

As the global leader in the NAND flash market, Samsung was investing heavily in NAND-embedded SSDs because of increasing demand for speedier storage amid the explosive growth in data-intensive devices and services such as smartphones, PCs, tablets and cloud-computing systems.

``Attention in SSDs is growing and we are positive for the storage device market because the market looks very lucrative and has higher growth potential considering this era of digital connection,’’ said a Samsung Electronics spokesman Song Cheol-gyu.

The SSD market is one of the most exciting and fast-growing segments in computer components today. SSD offers a host of advantages over traditional HDDs.

The NAND-based variant is more reliable and has the edge in low power consumption. Since flash has the advantage of lightning fast access time over DRAMs, SSDs are far superior to HDDs for small random reads and writes.

Solid-state drives using NAND flash memory chips are expensive but are catching on with social media companies, banks and other corporate customers that value speedy and energy-efficient performance.

Corporations will spend some $4.5 billion on the technology in 2015, up from just under $1 billion in 2010, according to a U.S.-based research house Gartner.

Song admits more investment by Samsung was coming onto SSDs and the world’s biggest memory chipmaker will cooperate with Seagate in various SSD-related projects, though the Samsung official declined to elaborate further.

In April, U.S.-based Seagate bought Samsung’s HDD unit for $1.37 billion, a part of sudden industry consolidation and in accordance with Samsung’s intention to push SSDs ahead of rivals such as Intel.

Intel feeling uneasiness

It’s no exaggeration that Intel is alarmed over its SSD bottom line at least in Korea, forcing the company to end business agreements with its local partners, which was also quite embarrassing.

Intel is applying a contingency plan to compete with Samsung for market advantage.

Its Korean branch has recently ended its partnership with Core Information Technology (COIT) and Intech & Company ― local manufacturers of computer main-boards and components ― to simplify its logistics channels in Korea for SSDs.

``We’ve had a partnership with Digital Henge since July 1. Digital Henge will be the only logistics player for Intel to handle SSD distribution in the local market,’’ said one Intel official.

``As Digital Henge has been selling Intel’s mainboards, the channel simplification process will help Intel create synergy for our SSD business in Korea,’’ added the official.

The business realignment comes after Intel’s previous local partners ― COIT and Intech & Company ― had been blamed for fierce pricing competition in Intel SSD products, resulting in Intel having to sell SSDs below market price.

``Big pricing promotions between our previous partners was one part of the reason we lost our initial grip on Korea’s SSD market,’’ said another Intel official.

According to the data from www.danawa.com, a pricing comparison site for PC components, the average price for Intel’s 80 gigabyte SATA II-based SSD as of the end of June decreased to 200,000 won from 270,000 won year-on-year.

``Well, the price drop was quite excessive,’’ said the official, adding the recent fine-tuned business plan was due to consensus from Intel’s top decision-makers amid the rise of Samsung in the new market.

Samsung Electronics has been challenging Intel’s initial lead in the local SSD market with steady product releases because Samsung wants to test the waters in SSDs before pursuing an aggressive advance into the global market.

K-Won C&C is Samsung’s only local partner for SSDs so far. Intel Korea has been known to sell 1 billion won in SSDs on a monthly basis, according to market watchers.

While flash memory chips are making inroads with companies, most data is still stored on the slower and much cheaper HDDs, which use pins to read and write data on spinning platters.

``It’s true that SSD has been a buzzword in the tech field over the last two years. Using an SSD, a system will boot up faster and will be more responsive,’’ said Song Hye-won, 33, a worker at a software company in downtown Seoul.

``Applications such as Photoshop and Internet browsers offer a smoother experience, and game load times are reduced,’’ said Song, whose notebook is equipped with SSD.

``Maybe Intel feels nervous and that’s why the U.S. chip vendor has dropped its dual partnership business strategy.’’