25-year Reign Finished
Intel hurt its pride in the second quarter by South Korean semiconductor manufacturers. Intel had reigned as king of the silicon-based semiconductor for over 25 years but Samsung Electronics surpassed the US manufacturer to become the leading maker of the computer chips and even SK Hynix is hot on its trail.
Intel posted US$14.8 billion (16.6 trillion won) in sales and US$3.8 billion (4.3 trillion won) in operating profit in the second quarter. The second-quarter sales and operating profit increased by 9 percent and three times, respectively, from the same period a year ago. Despite the significant growth, the US manufacturer lost its throne to Samsung Electronics in the global semiconductor industry.
This is because Samsung Electronics, which had taken second spot in the industry all the while, showed the growth that can overwhelm Intel. As Samsung Electronics’ semiconductor business recorded 17.58 trillion won (US$15.65 billion) in sales in the April-June quarter, which is 1 trillion won (US$890.47 million) higher than Intel, the company has become the industry’s number one for the first time. The business also posted 8.03 trillion won (US$7.15 billion) in operating profit in the second quarter, which is almost twice as much as Intel’s.
Samsung Electronics had a 45.7 percent of operating profit margin, while Intel had a 25.7 percent. The South Korean company surpassed Intel with a 20 percent point gap in profitability index as well.
This is largely due to Samsung Electronics’ effort to make a preemptive investment in the memory semiconductor chip business. The company has a 36.7 percent share in the NAND flash market and a 44 percent share in the DRAM market, maintaining first place, boosted by the stronger price of memory chips that has continued from the second half of last year.
Intel has been overtaken by Samsung Electronics and is now pursued by SK Hynix. SK Hynix’s second-quarter operating profit surpassed 3 trillion won (US$2.67 billion) for the first time, chasing Intel. As its quarterly operating profit is expected to reach 4 trillion won (US$3.56 billion) in the second half of the year, it is possible for SK Hynix to overhaul Intel.
Intel has been surpassed by South Korean semiconductor businesses one by one largely due to the effects of the fourth industry. With its strategy dubbed “Intel Inside,” Intel had planted itself as the leading player in the market of semiconductor chips for personal computers for more than two decades. As the personal computer market has entered a state of depression, however, the company’s influence has been in sharp decline. In particular, the fact that Intel fell behind global semiconductor producers in the mobile chip competition has had a decisive effect. Intel has been belatedly diversifying its business portfolio such as automotive semiconductor chips and 5G communication chips but it lags behind the competitiveness.
On the other hand, Samsung Electronics and SK Hynix were directly affected by growing demand of memory chips from the fourth industrial revolution including Internet of Things and artificial intelligence.
Industry watchers expect that the gap between Samsung Electronics and Intel will widen even further when Samsung Electronics’ sales of its fourth-generation 64-layer NAND flash chips are reflected in its semiconductor business performance in earnest in the second half of this year.
An official from the semiconductor industry said, “South Korean companies saw its performance grow due to a stronger price of memory chips but they are still concerned about Intel’s plan to release a new server platform and significantly improve profits in the second half of the year.”