Analyst: Samsung likely to pass Intel in ICs

8/26/2010 1:53 PM EDT

Whether Samsung surpasses Intel or not, their growth and level of investment throughout the last decade have been phenomenal.

Samsung is a great example of a company with a long-term vision and the patience needed to win in the market. With no disrespect meant to Intel, U.S. companies in general have too much focus on quarterly earnings and stock price fluctuations. For that reason alone, it is difficult to imagine that any U.S. company could achieve what Samsung has achieved in the last decade, and not only in their semiconductor business.

8/26/2010 3:04 PM EDT

Feory has it absolutely right!

I used to work for Intel many years ago marketing Intel's processors and memory to companies in the Far East. In Korea at that time, many companies had strategic 5-year plans, very similar to the 5-year economic plans in Communist countries. The key difference was that specific business segments, such as color TV, or appliances, etc. were targets with very specific metrics as to whether or not objectives were achieved. I know, as I was able to read the plans of Samsung, Lucky and Goldstar (now LG and LG Electronics), and others. At that time, the plans were a source of pride and were also shown to induce us to do business with them. Now, I am sure they are quite secret.

The Korean government also "encouraged" the plans as a means of reducing Korea Won outflow as well as increasing import tax revenue.

Unless US companies take a very serious long term view of their business and investments, and have the guts to stick with a rational plan, we will see more such achievements.

8/26/2010 4:35 PM EDT

I have no doubt that many companies would like to have a serious long-term plan that looks toward a more gradual and controlled upward growth, and ditch feast and famine cycles we all live through every few years. The problem is the investment community wants a return on their investments "yesterday". It's reached the point where even when a company posts a quarterly profit, it's not as much as the investors anticipated so their stock values drop like a rock.

8/26/2010 4:46 PM EDT

Samsung may have the right balance of long term planning and government support. Intel has too little and China too much.

The interesting bit to me is how the Samsung vs. Intel competition will shape industry dynamics in the new decade. Mobile will be a head on collision for the two.

8/26/2010 4:47 PM EDT

It is a little unfair comparing Samsung and Intel. If the US government interfere and combine Intel, IBM, HP, AMD, Micron, TI, Motorola and so on into a single company, it will surpass the entire South Korean economy. The two countries simply have different modes of growth.

8/26/2010 5:30 PM EDT

Different business models. Let's not forget that Samsung makes a lot of things that use its chips. Maybe if the US government interfered and combined Intel with Apple, Black and Decker, Mattel and... Oh... never mind.

8/26/2010 5:30 PM EDT

I get a little tired of pundits who equate "size" and "revenue." I am interested in earnings or earnings per share not sales. I think it will be a long time before Samsung exceeds Intel in profits because they real interested in profit. They want to big for bigness sake. Ultimately, they will have a bad year and implode. See Hyundai Semiconductor as an example.

8/26/2010 6:05 PM EDT

Sign of moving technology to Asia. World rotates...Asia to Rome to Europe, to US east coast to West coast and jumping the pacific to Asia back..

Time for us to do reality check, re-prioratoize (get jobs for people) on manufacturing.

Large manufacturing is in Asia, Custermores are in ASIA...and our focus on worls affairs.. what dow e expect...No Jobs..

8/26/2010 9:02 PM EDT

A more illuminating EETimes article dated July/2010. http://www.eetimes.com/electronics-news/4205064/Samsung-record-profit-strong-semiconductor-sales. This current article comparing Intel to Samsung is a little misguided. They should stress Samsung Semi and not mush it up with Samsung Electronics. Samsung Semi in 2Q 2010, has a $2.48B profit, 31% profit ratio, on its $8B in semiconductor sale. Intel in the same second quarter had $2.6B in profit on $10.8B in sales, for 26%. Combine that with a 13% growth vs. 3.4% means Samsung is in the process of pushing Intel aside. There is no question about it. There is no silver lining here or positive spin. These state sponsored companies with their long term plans are showing that constructive cooperation between government and industry pays off in the long run. China is the uber-example. The US invented this concept but has turned away from it, in favor of self aggrandizing, rear view looking jingoism.“We’re #1!” has replaced “Only the paranoid survive”. What projection can anyone cite that shows the US being number one in anything in 5 or 10 years? All the projections I’ve seen are indicating our demise. Middleclass standard of living projections. National Debt projections. Government budget projections. Trade projections. Industry off-shoring projections, School funding projections. Public university projections. Intel is the most competitive company the US has to offer and they are being overtaken by a methodical bureaucracy who has a long term goal and a supportive government. Next time you hear a politician rant about government intervention in the market place think of Samsung and Intel. Then vote for the other guy.

8/26/2010 10:48 PM EDT

One more thing struck me scary about this Samsung surpassing Intel thing. Intel has monopoly(duopoly if you consider AMD competition)and their overall margin is lower than Samsung Semi, which has commodity products. Andy Grove come back. Intel needs you.

8/27/2010 2:22 AM EDT

The economy doesn't care if the brains behind the company is govt dons or the exclusive B-school grads, it's the thinking that matters and Samsung+Korea seem to have it right, now. But my fear is are they growing too big laterally plus they bet hard on asian consumers who need not always return their favor.

8/27/2010 5:57 AM EDT

Samsung is expanding their work force in a very big way across all Asia Pacific countries like Korea, china and India. The rise of samsung could be easily related to the technology advancements which is bringing down the gap between the general purpose computers and smart phones. If the future belongs to smart phones definitely it belongs to samasung. With its highly used mobile application processors, volatile and non-volatile memories could easily surpass Intel. If only intel can come up with something that can really give them a big market share in the smart phone processor area.

8/27/2010 1:07 PM EDT

Cloud computing is de-emphasizing personal computing. All you need is a phone to hook up to the cloud. This is driving the observed trend. It won't be just Intel; Microsoft will also be affected.

8/28/2010 1:35 AM EDT

To pixies: Funny why you would think US government could interfere the market-driven global businesses. It is a free market BTW.

Don't think you understand the histories behind these companies.

Just to share a little with you here:

1. Intel with IBM? No way. They were competitors long ago. Eventually IBM backed out from PowerPC by selling its stake to AMCC.

2. Motorola, Apple and IBM again? No way. Apple dropped PowerPC and used Intel. IBM backed out from PowerPC, leaving Motorola to fight the battle alone with Intel. To shed losses, Freescale bears the debt.

3. AMD with Intel? They are head on, since day one. By anti-monopoly law, they can't acquire each other. To maximise popularity, they even resort to working with memory companies and form "compatibility alliances". AMD pumped money into Spansion. Intel pumped money into Numonyx with STMicro.
USA is killing among themselves, least to imagine they can stand together.

4. HP shedded away Agilient to Avago and bought in Compaq, dreaming to be OEM CE brands, but sadly felt the pinches when Fujitsu and NEC widening their combined market share in Asia and Acer "one notebook per child vision" putting HP in a "live today, die tomorrow" bleeding situation.

Have you heard of big things out from HP these few years? HP still thinks it is a prestigous brand by selling average servers and printers at high prices. Consumers are not so stupid to fall for it.

5. Micron is trying to make ends meet. With Seagate trying to exit ASAP from magnetic HDD and tied a knot with Samsung as strategic partner in solid-state memory, so as to balance out with Sandisk and Intel in this market.

6. Motorola least to mention and it is sooner or later dying anytime this decade. Motorola doesn't even have a say in CE market at all. It is happy to depend on its Tetra Radio and "sunset" modem for a living, living today, dying another day.

8/28/2010 1:40 AM EDT

You got to work closely with Samsung to know how they operate.

Definitely not what kdbouyce mentioned by looking at their 5-year plans.
"Paper strategies" are too high level, merely to justify CEO, CTO and COO are paid to do their jobs. Things are actually happening at middle and low level.

Samsung operates in "impromptu" and automonous departments. Leaders are given authority to spin their products on hand at will. This is unlike Japanese and American style, where everything has to seek upper management for approval, thus lining a long communication channel that takes a long time to see something coming down.

Look at Samsung and compare it with any Japanese and American companies, how fast they spin products? You can imagine the rest of the picture.

Samsung engineers work 15 hours a day. How much do average American engineers work?

Samsung cut suppliers at 70% cost price, but these suppliers wouldn't mind because they wanted their brands known if they got a design win in Samsung.
Japan and US laws won't allow that.
Pricing alone scared comsumers off and favour Samsung.

Samsung has imprinted in many consumers as affordable and reliable.
This is unlike Taiwanese brands - affordable but likely to fail. Acer is a good example for notorious failure rate. Dell is just an American version of Acer in consumer mentality.

American brands - damn expensive to reap you off (to pay American workers high salary), but product features are usually behind Korean and Japanese in terms of product specs.
Check out the notebooks, PDA, etc. American brands usually rolled out products with specs at least 1/2 to 1 generation behind Korean and Japanese products. To be blunt, Americans are slow.

Samsung won the market with speed, unity of the nation, technological edge among its Koreans partners inside and strategic partners outside.

8/30/2010 4:33 AM EDT

I do not agree with the 15-hr working day making the difference. Japanese workers have been like this for decades and no Japanese company has come close to challenging the likes of Intel. It comes down to having a big hairy audacious goal and being focused to get there. Of course, any help from the govt helps.

8/30/2010 2:28 PM EDT

Intel is tying to increase their market opportunities, see two recent, billion dollar aquisitions. But historically they failed in doing so (remember how they tried to enter optical networking and completely exit that shortly after). So if they fail this time Samsung might be able to pass them in IC revenue shortly...Kris

8/31/2010 9:51 AM EDT

Good article, based on profesional work from IC Insight. Nevertheless, just to show how risky is the analyst charter, compare this:
The projection is based on IC Insights' .... and an assumption that Intel will not significantly expand the scope of its IC businesses through a major acquisition—such as the purchase of a wireless IC operation that serves cellphones...
With the news of the day:
Intel to Acquire Infineon's Wireless Solutions Business

That I mean by showing this, is that analyst will always fail to predict the future. But we still don't know how to do better (just like Churchill comment about Democracy!)

8/31/2010 7:30 PM EDT

Intel's latest purchase of Infineon's Wireless Solutions Business is a move to secure more ICs in smart mobile platforms and that's a move which potentially enables them to leverage their eternal business units and further expand their wireless expertise and product offerings.

9/1/2010 1:53 AM EDT

The big difference between Samsung and Intel is indeed in corporate culture. Some in the forum have already commented on long working hours but I can say the same about many American businesses I have worked for. The difference is that many employees in Asian companies don't worry about next quarterly earnings and impending downsizing thereof. Asian businesses have always taken a long term strategy whereas the American businesses are too quick to pull up stakes and depart if the profits are not there.

It is premature to write Intel off to a second place slot. Intel may be on to something, if we see its recent trend on acquisitions including MacAfee.

Remember also that Samsung makes many products that are sold as products in the consumer market that Intel lacks. With the explosion in growth of consumer devices, it is a natural outcome for Samsung to increase its component volume.

9/4/2010 5:47 AM EDT

We all see how notebooks overtook desktops with their portability and more flexible internet access. Now phones are even more portable and internet access even more flexible than with notebook wifi. Most work I do can now be covered by smartphone. Samsung or ARM processor more likely than Intel.