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.

Samsung’s semiconductor division generated $69.1 billion in total revenue in 2017, eclipsing Intel’s $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 Moore’s 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 Intel’s revenue steadily increases 7 percent as it did in 2017, then Intel’s leadership in the semiconductor sector will be a thing of the past.

What should be Intel’s 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 Intel’s foundry needs to be wide open to any kind of customers at the competitive service cost with various IPs. Intel’s 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 Samsung’s and Intel’s 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 Moore’s Law creates enormous business opportunities for Samsung because of the limited supply of planar DRAM. Therefore, memory becomes a seller’s 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.

By: DocMemory
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