Sam­sung poised to un­seat In­tel as king of mi­crochips

Kuwait Times - - TECHNOLOGY -

In­tel’s more than two decade-long reign as the king of the sil­i­con based semi­con­duc­tor is poised to end Thurs­day when South Korea’s Sam­sung Elec­tron­ics el­bows the US man­u­fac­turer aside to be­come the lead­ing maker of com­puter chips. Sam­sung re­ported record-high quar­terly profit and sales Thurs­day. An­a­lysts say it likely nudged aside In­tel in the April-June quar­ter as the lead­ing maker of semi­con­duc­tors, the com­puter chips that are as much a sta­ple of the 21st cen­tury wired world as crude oil was for the 20th cen­tury.

Sam­sung said its semi­con­duc­tor busi­ness recorded 8 tril­lion ($7.2 bil­lion) in op­er­at­ing in­come on rev­enue of 17.6 tril­lion won ($15.8 bil­lion) dur­ing the April-June pe­riod. In­tel, which re­ports its quar­terly earn­ings later Thurs­day, is ex­pected to re­port $14.4 bil­lion in quar­terly rev­enue. On an an­nual ba­sis, Sam­sung’s semi­con­duc­tor divi­sion is widely ex­pected to over­take In­tel’s sales this year, an­a­lysts at bro­ker­ages and mar­ket re­search firms say.

Mo­bile de­vices and data are the keys to un­der­stand­ing Sam­sung’s as­cent as the new in­dus­try leader, even as its de facto chief is jailed, bat­tling cor­rup­tion charges, and it re­cov­ers from a fi­asco over Galaxy Note 7 smart­phones that had to be axed last year be­cause they were prone to catch fire. Man­u­fac­tur­ers are pack­ing more and more me­mory stor­age ca­pac­ity into ever smaller mo­bile gad­gets, as in­creased use of mo­bile ap­pli­ca­tions, con­nected de­vices and cloud com­put­ing ser­vices drive up de­mand and con­se­quently prices for me­mory chips, an area dom­i­nated by Sam­sung.

Just as Saudi Ara­bia dom­i­nates in oil out­put, Sam­sung leads in man­u­fac­tur­ing the high-tech com­mod­ity of me­mory chips, which en­able the world to store the data that fu­els the dig­i­tal econ­omy. “Data is the new crude oil,” said Mar­cello Ahn, a Seoul, South Korea-based fund man­ager at Quad In­vest­ment Man­age­ment. For over a decade, Sam­sung and In­tel each ruled the mar­ket in its own cat­e­gory of semi­con­duc­tor. In­tel, the dom­i­nant sup­plier of the pro­ces­sors that serve as brains for per­sonal com­put­ers, has been the world’s largest semi­con­duc­tor com­pany by rev­enue since 1992 when it over­took Ja­pan’s NEC.

‘Su­per cy­cle’

Sam­sung is reap­ing the re­wards of dom­i­nat­ing in the me­mory chip mar­ket which is grow­ing much faster than the mar­ket for com­put­ers that rely on pro­cess­ing units dom­i­nated by In­tel, said Chung Chang Won, a se­nior an­a­lyst at No­mura Se­cu­ri­ties. “Greater use of smart­phones and tablet PCs in­stead of com­put­ers is driv­ing the rise of com­pa­nies like Sam­sung,” Chung said. Since 2002, Sam­sung Elec­tron­ics has been the largest sup­plier of me­mory chips, called DRAMs and NANDs. But for years de­mand for me­mory chips was vul­ner­a­ble to boom and bust cy­cles de­pend­ing on out­put and on de­mand from the con­sumer elec­tron­ics in­dus­try.

At times, com­pe­ti­tion was bru­tal as sup­ply gluts arose. That changed in 2012 when Ja­pan’s Elp­ida filed for bank­ruptcy and was sold to Mi­cron Tech­nol­ogy, leav­ing only three ma­jor sup­pli­ers of DRAM, a type of me­mory chip used in servers, com­put­ers and hand­sets: Sam­sung Elec­tron­ics, SK Hynix and Mi­cron. Tight sup­plies cou­pled with rock solid de­mand have pushed prices of me­mory chips higher, with av­er­age sell­ing prices of DRAMs and flash me­mory chips dou­bling over the past year, bring­ing South Korea’s me­mory chip mak­ers record wide profit mar­gins. Both Sam­sung and SK Hynix are ex­pected to re­port all-time high prof­its this year. —AP

SEOUL: In this file photo, a wafer of 8-gi­ga­bit NAND flash me­mory de­vice, left, is dis­played at a Sam­sung’s show­room in Seoul, South Korea. —AP

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