Intel loses chip throne after 25 years, but Samsung lead is 'built on sand'
Samsung Electronics’s position as the No. 1 semiconductor supplier in the world — a move that kicked Intel Corp. to No. 2 — is only as solid as the volatile memory chip market.
Earlier on Tuesday, IHS Markit issued its annual world-wide semiconductor industry data for 2017, showing that Samsung Electronics Ltd. 005930, -2.56% of South Korea leapfrogged Intel Corp. INTC, -3.11% as the No. 1 semiconductor supplier in the world, based on revenue. Samsung had year-over-year sales growth of 53.6% and its highest semiconductor revenue ever, IHS said.
The IHS Markit data echoed preliminary data issued in early January by market research firm Gartner Inc., which showed that Intel was knocked off its perch as the top semiconductor supplier for the first time since 1992. IHS also said it was the first time in 25 years that Intel had not landed on the top of the chip heap.
Both firms note that this Samsung’s title is not as secure as Intel’s when the Silicon Valley giant first rose to the top. The gains Samsung experienced in 2017 were based on strong price gains for chips that have previously proved to be volatile.
“Samsung’s lead is literally built on sand, in the form of memory silicon,” Gartner analyst Andrew Norwood said when that company’s analysis was released, noting that more than two-thirds of semiconductor revenue growth for Samsung was from memory.
Read more about the high memory prices and their impact on the computer industry
Intel’s biggest chunk of revenue still comes from its microprocessors used in PCs and servers. In 2017, its nonvolatile memory solutions group, which jumped 37% for the year, hit $3.5 billion in revenue, a small percentage of Intel’s overall 2017 revenue of $62.8 billion. An Intel spokesman declined to comment.
Memory makers like Micron Technology Inc. MU, -1.74% insist that the recent price spike is different and more long-lasting, as their valuations and revenue spike. Micron, for example, has seen its stock price rise nearly 80% in the past year, as the S&P 500 index SPX, -0.29% has gained 10.8%.
Don’t miss: Micron bets that memory demand is here to stay
The analysts who put Samsung ahead of Intel are less convinced of a permanent change to a market that has been volatile in the past, however. Gartner’s Norwood expects that memory market pricing will weaken in 2018, initially for NAND flash and then DRAM in 2019, as China increases its memory production capacity.
“We then expect Samsung to lose a lot of the revenue gains it has made.”
IHS noted that Intel could pop right back to the top of the list if that change happens.
“If you look at the rapid increase in memory pricing and the subsequent revenue increase which resulted in Samsung’s rise to the top position (history in the memory segment has seen rapid rises followed by significant declines), the possibility exists that if a strong reversal in memory pricing were to occur it is possible that Intel could regain the top position,” Shaun Teevens, an IHS Markit analyst, said in an email.
So while it’s tough for the financial press and analysts to get used to referring to Intel as the second largest chip maker, even as it is keeps looking for more growth beyond its core microprocessor business, it isn’t likely to be a permanent change.
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