Intel had been the world’s largest semiconductor-based chipmaker by revenue for a record 24 years straight in 2017 when Samsung not only became the world’s most profitable tech company, it also ended Intel’s 24-year reign at the top. Samsung was able to do this because of memory chips. Its dominant position in the market coupled with a higher average selling price for DRAM and NAND products due to intense demand allowed the company to rake in more money than ever before.
Samsung maintained the momentum in 2018 as well by outselling Intel in the first half of the year. It’s the second half of the year that brought problems for Samsung and it’s that downturn in momentum which has allowed Intel to bounce back on top.
Samsung could end up retaking the spot from Intel
It became evident in the fourth quarter of 2018 that there was now more supply in the memory market than demand. Prices had to come down because manufacturers like Samsung and SK Hynix had flooded the market with inventory and price correction was the only way to sell it. Excessive oversupply took almost a year to correct as DRAM and NAND flash products saw a 47.4 percent average selling price decline in 2019, according to research firm Gartner.
Since the semiconductor division accounts for a large part of Samsung’s revenues, the impact was immediately visible on its balance sheet. Samsung posted its lowest profits in three years back in Q1 2019, a 56 percent decline in both Q2 and Q3, and a 53 percent predicted decline in operating profit for Q4 2019.
Intel wasn’t hit by this downturn because it’s not in the memory market. On the other hand Samsung’s memory revenue, which accounted for 82 percent of its sales in 2019, saw a 32 percent decline last year. Even though Intel’s semiconductor revenue declined by 0.7 percent in 2019, it was still able to take back its position as the No. 1 global semiconductor vendor by revenue in 2019. It made $65.8 billion in revenue compared to Samsung’s $52.2 billion.
This is why Samsung has been investing heavily to diversify its semiconductor business and wants to increase its revenues from non-memory products. It may even have won an order from Intel to manufacture its 14nm chips as Intel struggles with a CPU supply shortage. Things are also looking up for Samsung in the memory market which started stabilizing towards the end of 2019. The excess inventory is likely to clear in 2020 which should help drive the average selling price back up. So it’s still quite likely that Samsung could retake the top spot from Intel if the situation improves.
The post Samsung loses its top semiconductor market position to Intel appeared first on SamMobile.
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