Samsung poised to unseat Intel

Intel’s more than just two decade-long reign as the king of this silicon-based semiconductor is poised to end Thursday when South Korea’s Samsung Electronics elbows the U.S. manufacturer aside to become the leading manufacturer of computer chips.

Thursday, Samsung reported profit and earnings. Analysts say it probably nudged Intel from the quarter aside as the manufacturer of semiconductors, the computer chips which are a staple of the century as oil was for the 20th century wired world.

Samsung said its semiconductor business recorded 8 trillion ($7.2-billion) in operating income on revenue of 17.6 trillion won ($15.8-billion) throughout the April-June period.

Intel, which reports its quarterly earnings later Thursday, is expected to report $14.4-billion in annual earnings.

On an annual basis, this year, Samsung’s semiconductor division is expected to overtake the earnings of Intel, analysts in market research companies and brokerages say.

Mobile devices and data are the keys to understanding Samsung’s ascent as the new business leader, even as its de facto chief is jailed, combating corruption charges, and it recovers from a fiasco over Galaxy Note 7 smartphones that needed to be axed last year as they were likely to catch fire.

Producers are currently packing more and more memory storage capability into gadgets, as use of programs that are mobile, cloud computing companies and connected devices drive up demand and consequently prices an area.

Samsung leads in producing the commodity of memory chips, which allow the world to store the information that fuels the market, as Saudi Arabia dominates in petroleum output.

“Data is the new crude oil,” said Marcello Ahn, a Seoul, South Korea-based finance manager at Quad Investment Management.

For over ten years, Intel and Samsung each dominated the marketplace.

Intel, the provider of the processors that function as intelligence for computers, has become the world’s biggest semiconductor company by revenue since 1992 as it overtook the NEC of Japan.

Samsung is currently reaping the benefits of dominating in the memory chip market that’s growing faster than the market for computers that rely on processing units said a senior analyst at Nomura Securities, Chung Chang Won.

“Greater use of smartphones and tablet PCs rather than computers is driving the growth of companies like Samsung,” Chung said.

Samsung Electronics has become the largest supplier of DRAMs that are called, memory chips and NANDs. However, demand for memory chips was exposed to boom and bust cycles based on output and on demand from the consumer electronics sector. As supply gluts arose competition was brutal.

That changed Japan’s Elpida filed for bankruptcy and was sold to Micron Technology, when, leaving just three providers of DRAM, a type of memory chip used in computers servers and handsets: SK Hynix, Samsung Electronics and Micron.

Tight supplies have pushed prices of memory chips with average selling prices of flash memory chips and DRAMs doubling bringing wide profit margins to the memory chip manufacturers of South Korea. This year both SK and Samsung Hynix are expected to report profits.

Amid this boom that analysts predict a memory chip “super cycle,” global semiconductor revenue is forecast to jump 52 percent this year, reaching $400-billion for the first time, according to market research company Gartner.

Intel is expected to post $60-billion in annual sales, according to a market consensus polled a information provider, by FactSet. Samsung Electronics’ semiconductor business is expected to report 71.9 billion won ($62.6-billion) from full-year earnings.

Looking forward, SK and Samsung Hynix, which control more than three quarters of the DRAM sales, are increasing their spending in anticipation of demand that is strong. SK Hynix increased its capital spending to 9.6 trillion won ($8.6-billion) this year, up more than 50 percent from last year. Samsung has said it intends to invest $18-billion in another four years to expand memory chip production capacity.

Not only tech firms but also transport, tourism, retail, food and other businesses are trying to find ways to utilize or handle data, to obtain insights on trends or customer tastes and earn money out of “big data.” The rising use of automobile connectivity along with the “internet of things” is expected to induce still further demand for the chips that have helped Samsung proceed, at least for now.

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Samsung sees record earnings in the next quarter (Reuters)

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