Friday, March 09, 2018
After losing the No. 1 spot in semiconductor revenue for the first time since 1992, Intel needs new strategies to narrow the gap or surpass Samsung.
Samsungís semiconductor division generated $69.1 billion in total revenue in 2017, eclipsing Intelís $62.8 billion. Thanks to high memory prices, Samsung knocked Intel from the top spot in chip sales for the first time since 1992.
As planar DRAM faces scaling limitation due to the impending end of Mooreís Law, cost scaling becomes slow and planar DRAM is ultimately unable to meet demands. Bit growth shrank to the lowest point in 23 years. Therefore, it is difficult to expect a downturn in memory prices any time soon.
However, will Samsung revenue grow continuously in 2018? According to DRAMeXchange, DRAM revenue grew by 76 percent in 2017, and is expected to increase by more than 30 percent in 2018. If we assume DRAM revenue growth will result in at least 20 percent revenue growth for Samsung semiconductor division in 2018, and Intelís revenue steadily increases 7 percent as it did in 2017, then Intelís leadership in the semiconductor sector will be a thing of the past.
What should be Intelís next step? As a follower, Intel needs new strategies to narrow the gap or surpass Samsung.
Intel may think about expanding its foundry business as much as possible without any restriction in foundry strategies or business models. The door of Intelís foundry needs to be wide open to any kind of customers at the competitive service cost with various IPs. Intelís foundry could be a profitable business for Intel in little time because Intel has the best technologies.
Another suggestion for Intel is direct competition with Samsung in the memory sector. Intel has a long history in the DRAM business and still has strong embedded DRAM technologies. Think about 3D DRAM. It will be a game changer because DRAM vendors do not have 3D DRAM technology yet. DRAM vendors are making record revenues and profits using traditional planar DRAM, which already faces scaling limitation. If 3D DRAM comes up, it will certainly create a new paradigm in the DRAM business. Therefore, direct competition in the DRAM business using 3D DRAM will be the most efficient way to compete with Samsung.
Even though Intel's NSG (Non-Volatile Memory Solution Group) has innovative 3D XPoint technology, additional disruptive technologies are needed for Intel NSG in order to differentiate its NSG business from its competitors. As shown below, there is a wide gap between Samsungís and Intelís NAND flash market share. In fact, Intel is a small player in the NAND sector. Although Intel has competitive NAND technologies, it is advantageous to discover emerging technologies from outside sources and adopt new innovations for better Intel NSG business. 3D XPoint has huge potential, but may need more time to be cost competitive. Therefore, the R&D expense and operating income should be balanced. When other NAND vendors are making record profits, Intel NSG needs to make profits, too.
Many may not have expected that Samsung would surpass Intel in such a short time. Ironically, the end of Mooreís Law creates enormous business opportunities for Samsung because of the limited supply of planar DRAM. Therefore, memory becomes a sellerís market.
Even though cell phone makers in China complain about high memory prices and the Chinese government is considering the possibilities of DRAM price-fixing, the hike in memory prices seem unstoppable. If DRAM revenue grows more than 30 percent in 2018, as DRAMeXchange predicts, Samsung will put more distance between itself and Intel. Traditionally, there was very small business overlap between Intel and Samsung. But in order to retake the throne, Intel needs direct competition in the memory and foundry markets. Intel certainly needs new strategies as early as possible.
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