The Strategist

Samsung to overtake Intel

05/03/2017 - 15:11

South Korean technology giant Samsung is coming close to the world’s leading manufacturer of microprocessors, which currently belongs to American corporation Intel. This would be a hefty victory for the Koreans, as Intel has been in the lead for the past 24 years. Experts from IC Insights research company predict that such a rearrangement may occur already in the current year.

Jamie McCall
Jamie McCall
Samsung is taking advantage of the fact that Intel continues to diligently keep high prices for its processors. This insistency has gradually begun to strain not only end users, but also those companies that are forced to buy chips to produce their electronics. In terms of product costs, the Korean manufacturer is much more friendly, and therefore the volume of orders continues to grow at an impressive rate.

Analysts predict that by the end of the second quarter of this year, Intel's revenue will amount to $ 14.4 billion, while Samsung will earn 14.9 billion in the same segment of the market. And we are talking only about the production of microprocessors. For the first quarter, chips brought 13.5 billion to the Koreans, which is 4.1% more than the same period last year. Intel also earned 14.2 billion in the first 3 months of 2017, thus managing to get ahead of Samsung. 

Samsung’s division, responsible for production of microprocessors, is by far the main source of the company's revenue. The South Korean company has already taken 11.8% of the market, while Intel continues to dominate with 15.9%. However, if the current trends continues in the future, the Koreans will inevitably bypass their American counterparts. Not so long ago, Samsung invested $ 1 billion in a new factory in the Texas city of Austin, and in the next year will invest another 12.5 billion to create similar facilities around the world.

In late April, the company published its financial statements. Samsung's net profit in the first quarter grew by 46% YoY to 7.68 trillion won ($ 6.8 billion), the highest level in more than three years. Revenues increased by 2% to 50.55 trillion won ($ 45.5 billion). In quarterly terms, revenue decreased by 5%. Operating profit rose 50% year-on-year to 9.89 trillion won ($ 8.7 billion). 

The last two financial indicators coincided with the company’s preliminary results announced earlier. Samsung came close to its record on operating profit in the III quarter of 2013, when the vendor's revenue reached 10.1 trillion won.

The total amount of capital expenditures for the first quarter was 9.8 trillion won. Of these, 5 trillion won were spent on semiconductors and 4.2 trillion won - on the screen panels segment. Although the capital expenditure plan for 2017 has not yet been finalized, it is possible to forecast a significant increase in total annual costs, especially due to investments in V-NAND, System LSI and OLED technologies.

In 2017, the total revenue is expected to increase compared to the previous year. The component segment will show significant growth due to a favorable supply-demand ratio in the memory division, as well as increased supplies of OLED panels. The product unit will focus on supporting profitability by increasing sales of flagship products.