Investment Uncertainty

 

Samsung Electronics and SK Hynix, which are performing well owing to the thriving semiconductor memory market, haven't yet decided on their new businesses. They are looking for a new growth engine in the non-memory sector under the management principle that they should prepare for crises when they ride high. However, they haven't made a breakthrough yet.

According to industry sources on June 29, Samsung is struggling in the application processor (AP) market. SK Hynix, on the other hand, is agonizing over its aging M10 plant.

Samsung's share in the AP market has been in decline. Research firm Strategy Analytics reported that the world’s largest memory chip maker accounted for only 6.3 percent in terms of sales quantity in the AP market last year, a year-on year drop of 5.7 percent. In terms of revenue, its market share decreased from 10.1 percent to 7.9 percent over the same period.

With LTE-A phones appearing in 2012 and competition for handsets with a high-resolution QHD display swinging into high gear, Samsung appears to be steadily losing its competitiveness in technology and price. Related to this issue, Kwon Oh-hyun, vice president of Samsung Electronics, said, “Our System LSI division is in a stalled growth mode. In fact, it is in crisis.”

SK Hynix hasn't come up with measures to utilize its old DRAM facilities in Icheon, which will be useless in the latter half of next year when the construction of the new M14 plant is scheduled to be finished. Experts have been raising the possibility of the expansion of the foundry business, the enlargement of research centers, or the entry of new system semiconductor markets. But the Korean chip maker has a wait-and-see attitude.

Currently, SK Hynix is running a system semiconductor business in the field of CMOS image sensors for mobile phones. Nevertheless, the firm needs another growth engine. But it has no choice but to maintain a cautious attitude towards a new business. Its stock price is on the rise, surpassing 50,000 won (US$49.40) per share on June 29, due to intensified market expectations.

An industry source explained, “The semiconductor memory market is expected to keep prospering until next year. But to sustain growth, it is necessary to develop business development capabilities in the non-semiconductor memory field.” The source added, “The direction of their strategy in the non-semiconductor memory area could decide the success or failure of the business in five to 10 years.” Nonetheless, some in the system semiconductor industry point out that the two companies should focus on keeping their share of the global semiconductor memory market rather than expanding their businesses, since maintaining market dominance itself is a great achievement.

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