Samsung Rides High on Record Q2 Profits. Set to Overtake Intel as Number 1 Chipmaker

Growing evidence of a memory chip industry super-cycle and the company’s market positioning, Samsung’s record Q2 profits should send alarm bells ringing for fellow competitors

Samsung has posted a record profit for the second quarter of FY2017, on the back of robust chip sales. Some analysts are predicting that Samsung may even overtake rival chip maker Intel, by the end of the year, as the world’s leading chipmaker, by sales. TechSci experts weigh in on the developments.

Chip Market: The New Battleground for Tech Giants:

Intel has been the number one chipmaker in the world since 1993, when it released the Pentium CPU. However, rapid adoption of smartphones across the world has meant that rival companies are closing the gap. Predictive analysis suggests that Samsung’s 2017 chip sales for the year will be at the $63 billion level, while Intel’s is estimated at the $60 billion level. For Samsung in Q2, operating profit was estimated at 14 trillion won ($12.11 billion) up 72% on a year earlier, while revenues rose 18% from a year earlier.

Microchips have piqued the interest of the financial world globally. A cursory look at NASDAQ will reveal that chipmakers such as Advanced Micro Devices (AMD:NASDAQ), Nvidia (NVDA:NASDAQ) and Micron Technology (MU:NASDAQ) have all started the year very strong and are some of the best performers on the American bourse; chipmakers are also performing very well on stock exchanges worldwide.

Smartphones, PCs, Tablets and OLED: Gadgets and Technologies that Drive the Market:

Samsung said on Tuesday it would invest $18.6 billion to extend its lead in memory chips and next-generation displays. Samsung’s semiconductor division, which manufactures DRAM and NAND chips for mobile devices and servers, generated nearly 8 trillion won ($7 billion) in April-June, or 60 percent of its quarterly profit.

TechSci experts have said that Samsung earlier used to follow market cycles, and their financial performance usually mirrored trends in the global economy. However, currently it is the biggest growth driver and leading innovator. OLED (organic light-emitting diode) market is a good example of this; Samsung has a stranglehold on the OLED market as per TechSci Research report “China OLED Market By Type, By Application, Competition Forecast and Opportunities, 2011 – 2021” not just in China but in the world.

Major tech companies have only recently started to get interested in technology that Samsung has had a decade long head start in developing. Increasing usage of OLED in smartphones, tablets etc. will further boost Samsung’s financial profile.

While growth may normalize over the course of the next year or so, TechSci Research experts predict that memory chip industry is quite possibly in the midst of a super-cycle, and will likely remain so for some years, given increasing demand from services such as cloud computing and AI.

With IoT (Internet of Things) becoming such an important aspect of life, surging prices of memory chips given the demand-supply mismatch is one of the biggest reason for Samsung’s enviable position the market. As long as Samsung continues with successfully innovating and riding the crest of the super-cycle, it will be very hard for any company to challenge Samsung’s dominance in this specific industry.

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