Intel beat longtime rival Samsung to lead the market in semiconductor sales in the fourth quarter of 2018. The end of last year was the first time the Silicon Valley giant has sat atop the chart in nearly two years. Notably, Intel’s resurgence occurred amidst the greatest decrease in the memory market since the 2008 recession.
There was a 10.2 percent drop in semiconductor sales overall last quarter. That decline was driven in part by falling prices for memory chips used in mobile phones and enterprise servers.
Ironically, Samsung’s drive to innovate is partially responsible for undercutting its market position.
Samsung has a Serious Memory Problem
According to business intelligence firm IHS Markit, the memory sector drop hit Samsung much harder than Intel; their sales last quarter fell 24.9 percent and 2.3 percent respectively. The South Korean company took a bigger hit because most of its chipsets are sold to mobile phone manufacturers.
Memory chips comprise 87 percent of Samsung’s semiconductor sales. Conversely, data storage only represented 6 percent of the American firm’s components business. Intel’s sales for the quarter were $18.4 billion, with Samsung trailing at $15.8 billion.
The last time Intel sold more semiconductors than Samsung was the second quarter of 2017.
The markets for cell phones and servers were on the rise then. In Q3 2017, Samsung’s sales overtook Intel’s, a development that ended the latter corporation’s 25-year reign as the semiconductor industry’s market leader.
Better Chips are Hurting the Market
Despite the market upheaval, semiconductor sales revenues rose overall in 2018. Samsung’s sales increased 20.3 percent to $74.6 billion while Intel’s rose 13.4 percent to $69.9 billion. However, the consumer electronics firm’s 2019 financial outlook isn’t as rosy.
Currently, Samsung’s best-performing segments are mobile technology and semiconductors. In 2018, the corporation’s smartphone shipments dipped by 4.1 percent. Moreover, it’s expected that the softening of the Chinese mobile device market will produce similar outcomes through 2020.
One reason why consumers are buying fewer smartphones now is that their performance level is approaching home computer quality. Samsung has been increasing the capacity and speed of memory chips for years and introduced a groundbreaking 1TB memory chip in February. As such, mobile device memory size now exceeds the typical user’s needs. Consequently, the public doesn’t feel the need to upgrade their hardware as frequently.
That shift in consumer priorities has had a negative impact on Samsung’s two most profitable divisions. Indeed, the company isn’t selling their new phones to people because their old devices aren’t obsolete. Concurrently, the firm’s manufacturing clients don’t need as many memory chips because consumers aren’t buying their phones either.
As a result, it’s hard to imagine Samsung replacing Intel as the top semiconductors company again anytime soon.