Samsung goes after Qualcomm in application processors

By Jun Ji-hye

Samsung Electronics has begun allocating more resources to strengthen its competitiveness in the area of application processors (AP) and other non-memory chips to reduce its reliance on the memory chip business, according to industry analysts Sunday.

They said the introduction of fifth-generation (5G) networks will offer an opportunity for Samsung to reinforce its non-memory business as the next-generation networks will create a variety of new services including self-driving cars and internet of things (IoT) powered systems as well as 5G smartphones.

The strategy to pull up capability in its non-memory business comes as Samsung has been suffering from sluggish demand for its memory chips.

According to industry researcher IC Insights, firms focused on the memory chip business, including Samsung Electronics, are expected to suffer a decrease in sales by about 20 percent.

Samsung Electronics Vice Chairman Lee Jae-yong also mentioned a willingness to enhance the non-memory sector when he showed lawmakers around the firm's semiconductor plant in Hwaseong, Gyeonggi Province, Jan. 30.

“We will nurture the non-memory sector, including the system semiconductor and foundry business, as future growth engines,” he told lawmakers, saying his firm will overcome the downturn in the memory chip market through consistent innovation.

Among others, Samsung is concentrating its efforts on boosting its capability in manufacturing APs.

Referred to as the brain of smartphones, the use of APs is recently expanding to other products such as self-driving cars, and is expected to expand further to IoT-powered home appliances such as vacuum cleaners.

U.S. chipmaker Qualcomm maintains the powerhouse position in the global AP market with a 45 percent market share as of the first quarter of 2018, according to Strategy Analytics.

Samsung is ranked third with a 14 percent share after Apple's 17 percent.

It is essential for Samsung to destroy the stronghold that Qualcomm has on the AP market if it wants to become a leader in the non-memory sector.

Analysts said the Korean firm is expected to take two strategies toward that end.

One is acquiring companies possessing relevant technologies.

Speculation is already abounding that Samsung will seek to acquire NXP Semiconductors, a global supplier of automotive semiconductors, based in Eindhoven, the Netherlands.

Samsung is said to have enough capital to finance merger and acquisition deals with analysts estimating the sale price of NXP at about 50 trillion won ($44 billion).

In 2016, Qualcomm tried to take over NXP, but to no avail.

Another strategy that Samsung is expected to take is opening up the market in APs for cars, considering Qualcomm dominates the market of APs for smartphones.

The Korean firm launched its first automotive chip brand, Exynos Auto, in October last year.

“Samsung Electronics' competitiveness in the non-memory sector has been reinforced,” said Lee Jong-wook, an analyst from Yuanta Securities. “With the introduction of 5G, Samsung's growth in the non-memory business will be highlighted.”