Samsung Electronics, the largest producer of memory chips and smartphones in the world, has recently echoed its rival Intel in indicating a rebound in demand for personal computers. Although both companies are set to compete in the chip manufacturing sector in the coming years, this positive development bodes well for Samsung.
After experiencing a slowdown in demand for consumer electronics due to the Covid-19 pandemic, Samsung’s fortunes are set to change. In its recent earnings report, the company stated that it expects PC and mobile demand to benefit from the replacement cycles of products sold during the initial phase of the pandemic, specifically looking ahead to 2024.
For the third quarter, Samsung reported a net profit of 5.844 trillion won ($4.34 billion), representing a 38% decline compared to the same period last year. Furthermore, overall revenue stood at 67.405 trillion won ($50.01 billion), reflecting a 12% decrease.
This resurgence in PC demand not only provides a cyclical boost for Samsung but also parallels the positive signs seen by its U.S. counterpart, Intel. As Intel’s stock prices rose sharply earlier this week, it is evident that both companies are benefiting from improving market conditions. However, it is crucial to monitor the progress of their contract chip-manufacturing businesses, which could ultimately determine their future success in the industry.
The Growing Foundry Businesses
While the foundry businesses are subject to cyclical patterns, they also provide structural growth, especially with the increasing demand for advanced chips driven by new technologies. Samsung has projected positive news in this regard, forecasting that the foundry market will experience growth in 2024. This growth can be attributed to a rebound in mobile demand and the continued expansion of high-performance computing for applications such as artificial intelligence.
Intel’s Ambitions and Current Position
Intel has set an ambitious goal to surpass Samsung and become the second-largest player in the foundry market by the end of this decade, with Taiwan Semiconductor Manufacturing (TSM) reigning as the top player. However, Intel still has a long way to go to achieve this milestone.
Revenue Comparison: Intel vs Samsung
In the last quarter, Intel’s foundry process generated $311 million in revenue. On the other hand, Samsung, whose foundry unit’s revenue is not individually disclosed but estimated by market tracker TrendForce, achieved around $3.2 billion in revenue, securing a 12% share of the global market.
Intel’s Optimism and New Customers
Last week, Intel instilled hope for its foundry ambitions by revealing that it had secured three new customers in the third quarter. These customers have signed up for Intel’s 18A process, which will commence manufacturing in late 2024. The 18A process represents a 1.8-nanometer node, indicating the size of the circuitry on a chip.
Samsung’s Future Plans
Samsung has its own plans for future manufacturing nodes. It aims to achieve 2-nanometer node manufacturing in 2025 and further progress to 1.4-nanometer node manufacturing by 2027.
Market Reaction
On Tuesday, Samsung shares traded down 0.6% in South Korea, while Intel shares experienced a 0.3% increase in premarket trading.