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Tuesday, August 01, 2017
Samsung Semiconductor Revenues to be Higher than Intel's, says IHS


Samsung has captured the number one position in terms pf Semiconductor revenue, according to Len Jelinek, senior director for semiconductor manufacturing, IHS Markit.

In a corporate fashion the data provided by the individual companies presents only a portion of the total picture. In ranking the semiconductor industry companies revenues, IHS believes the focus should be on merchant market revenue, the revenue obtained by a company through the sale of their own semiconductor components. This means that in a market share calculation the sale of components to third parties should not be included since a third party will be credited with the component sale into the market.

IHS believes that the semiconductor revenues Intel achieved in the second quarter of 2017 were US$14.7 billion. Subtracting out third-party sales or foundry operations and other non-semiconductor revenue results in Intel's merchant market semiconductor revenues at US$14.4 billion.

Samsung announced total semiconductor revenues of US$15.5 billion. The US$15.5 billion includes an estimated US$1.1 billion of foundry services revenues. So with subtracting out the foundry revenues, Samsung's merchant market sales end up at US$14.4 billion, IHS indicated.

Since neither company formally discloses their actual third-party sales or other non-semiconductor revenues, the two companies end up separated by a mere US$57 million with Intel remaining as the leader, IHS said.

Analyzing the reported semiconductor revenues within the key segments that each company participate in provides even further insights, according to IHS. Intel experienced a declined by 0.2% in total semiconductor revenues in the second quarter. Intel's main business microprocessors grew slightly, representing approximately 76% of its total semiconductor revenues.

Samsung's total semiconductor revenues in the second quarter grew by 12% to US$15.5 billion; Samsung memory represented 79% of its total business, growing by 15.4% over the first quarter, IHS said.

IHS believes that the rapid growth in revenues by Samsung is more a reflection on market supply-and-demand issues rather than a successful long-term strategic plan by either company.

Intel has been strategically refocusing the company, away from a declining client-computing market. Intel views its long-term success as being driven by growth in the datacenter, Internet of Things (IoT) and automotive segments. Intel's advanced technology offerings fit well into these categories.

Samsung continues to follow a long-term strategy focusing on DRAM and NAND flash memory. This strategy has resulted in Samsung positioning itself as the global market leader providing the most advanced memory technology.

During the last nine months, as memory companies transitioned their technology to more advanced nodes, overall capacity declined at a faster rate than companies were able to expand their manufacturing, IHS indicated. The loss of capacity throughout the industry could not have come at a worse time.

Increased demands from multiple market segments for both DRAM and NAND occurred at the same time that capacity was declining, IHS said.

History should have taught the semiconductor industry that technology transitions do not go as planned. In the case of DRAM, capacity declined by more than 10% while demand was increasing by more than 20%. A similar story was taking place within NAND. The transition to 3D NAND resulted in a reduction of available components. Technology development and manufacturing expansions have taken longer than anticipated, IHS noted.

History tells us that extreme volatility is a trait within the memory market. This reality ultimately has resulted in the consolidation of memory suppliers, IHS said. As the semiconductor industry transitions through adjustments in supply and demand, the economics of memory pricing follows.

Ultimately, the long-term battle for revenue supremacy within the semiconductor industry will not be won or lost solely based on ASP fluctuations or third-party manufacturing, IHS believes. Success within the market will be defined by technology and the sales of ones' products.



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