Samsung could overtake Intel in IC sales by mid-decade

Expansions in Samsung's IC business and capital expenditures could move the company up from No. 2, making it the world's largest semiconductor supplier in the 2014/2015 timeframe, IC Insights reports.

By Suzanne Deffree, Managing editor, news -- EDN, August 27, 2010

Samsung Electronics may soon overtake Intel in terms of annual revenues, according to a report issued this week by IC Insights.

The market research house has estimated that Samsung could become the largest IC maker by the middle of this decade, based on its leadership in DRAM, NAND flash, MCUs, and image sensors, as well as its expanding MPU and foundry work.

According to IC Insights data, Samsung, currently number two behind Intel in total IC revenue and already the world's largest memory IC supplier, has seen its semiconductor revenues rise at CAGR (compound annual growth rate) of 13.5% from 1999 to 2009, while Intel's sales have increased at a CAGR of just 3.4% in the same period. Extrapolating these growth rates, Samsung would pass Intel in semiconductor sales in 2014, the research company forecast.

"Samsung has managed to exceed Intel's growth rate by aggressively increasing its market share in DRAMs as the PC market has grown and by taking the lead in flash memory sales, but it's also expanding in non-memory segments, including microcontrollers, application processors for cell phones, and portable systems, CMOS image sensors, and IC foundry services," Brian Matas, VP of market research at IC Insights, said in a statement. "For decades, Intel's growth has been primarily hitched to microprocessor and chipset sales in PC and server markets, but the company is now aiming to expand its business into consumer, cell phones, and embedded-computing applications with new system-on-chip designed based on its low-cost Atom processor architecture."

IC Insights noted that for the better part of the last two decades Intel and Samsung have coexisted, expanding without competing directly with each other. But the researcher reminded that these semiconductor companies are now competing in NAND for non-volatile storage and microprocessors in handheld devices.

Indeed, Intel now competes with Samsung in NAND flash through its IM Flash joint venture with Micron Technology. Further, Samsung has become a major supplier of application processors based on cores licensed from ARM, which compete with Intel's Atom processors in smart phones.

To be true, Intel is not down for the count just yet. "It cannot go unnoticed that Samsung has spent more on semiconductor capital expenditures than any other supplier, including Intel, in six of the past seven years (2004-2010 forecast)," Matas said. However, he noted that, Intel's ability to develop new technologies should not be overlooked. "Intel remains the industry leader in R&D spending and, in fact, had a larger budget for R&D in 2006 to 2009 than it did for capital expenditures," Matas said. "The same is forecast to hold true in 2010. Intel's R&D expenditures have increased from slightly more than $5 billion in 2005 to a budget of $6.6 billion in 2010. Meanwhile, from 2005 to 2009, Samsung's R&D expenditures ranged from $1.5 billion to $2.5 billion less per year compared to Intel's R&D budget."

Based on its five-year forecast and considering variables including no major downturn in Samsung's memory business and an assumption that Intel will not significantly expand the scope of its IC businesses through a major acquisition, IC Insights believes there is a greater than 50% chance that Samsung will move up from No. 2 and become the world's largest semiconductor supplier in the 2014/2015 timeframe.