Samsung rises quietly, Intel troubled and stuttering

However, 2004 was a year in which Samsung Electronics Co. Ltd., the number two chipmaker and also a consumer electronics giant, could do no wrong while Intel, a chipmaker that profoundly influences the PC market, struggled with a series of miss-steps and reverses.

In January Intel announced it would enter the liquid crystal display market in the second-half of 2004 with a liquid crystal on silicon (LCOS) chip codenamed "Cayley". In August Intel shelved the plan, apparently indefinitely. Intel's Prescott processor was already suffering from heat and yield issues, when in May 2004 Intel cancelled its next chips for desktop and server computers, codenamed Tejas and Jayhawk.

In June Intel was forced to recall 10 to 15 percent of the pre-release shipments of its Grantsdale and Alderwood peripheral logic chip sets for desktop computers after it found a manufacturing flaw that could make some systems hang up or fail to boot. At the time it was estimated this miss-step would cost the company in the range of US$75 million to US$100 million.

Perhaps an even bigger dent to Intel's prestige came when it still seemed unable to "get it" about clock frequency and power consumption, despite the earlier Prescott, Tejas and Jayhawk issues. The company continued to push ahead through most of the year with plans for a 4-GHz Pentium 4 processor. Late in July 2004 the company admitted it would miss it's own delivery schedule in the fourth quarter of 2004 but still would not admit defeat. Instead Intel delayed the planned start of 4-GHz Pentium shipments until the first quarter of 2005. But in October Intel quietly sent a letter to customers pulling the plug on the whole idea.

This string of stuttering reverses had continued even after Craig Barrett, Intel's president and chief executive officer, had sent out a letter to the company's 80,000 employees on July 21 calling for them to focus on "actions and attitudes". The letter reportedly referred to a meeting between Barrett and his management team. "I wanted senior managers to have no doubt about the need to improve our performance," a Financial Times report quoted Barrett telling employees in the letter.

Having reached the age of 65 Barrett is set to leave his posts as president and chief executive officer in May 2005, moving up to chairman to let Paul Otellini have a go at running Intel.

Meanwhile South Korea's Samsung is the king of the memory hill, being the world's largest purveyor of both DRAMs and of flash memory. It has been clear for sometime that flash memory had replaced DRAM as a process technology and application driver with its key position in mobile phone handsets and consumer electronics. This has left DRAM as largely a PC-specific memory albeit with large volumes.

In 2004 Samsung again proved itself adept at manipulating its leading position in both markets to influence price and give its competitors, including Intel in flash, a difficult time.

The result of this, and an underlying good year for DRAM prices, is that while in 2003 Intel was nearly three times as big as Samsung in semiconductor sales in 2003 (US$27.0 billion to U$9.6 billion) it looks set to be only just over twice as big as its nearest rival(US$31.1 billion to US$15.1 billion) in 2004.

At the greater than 50 percent growth clip Samsung is set to show in 2004 it wouldn't take Samsung long to catch Intel. And if those miss-steps and stutters continue in Otellini's reign, the landscape could change even more dramatically than it has already.

(Return to the 2004 Top 10 story list or go to No. 5).