Samsung Looks to Semiconductors and RAM to Boost Profit

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Although sales of the Galaxy S6 and Galaxy S6 Edge have not been particularly bad the Galaxy S6 has not been the cash cow Samsung hoped to produce in 2015. The company is far from struggling, the profit generated by Samsung’s smartphone division was flat in the second quarter at $2.36 billion, however it is increasingly relying on its fabrication facilities as a driver of growth. This doesn’t exactly expose Samsung as a weak target when one considers the breadth and strength of their chip making manufacturing, though it does bring up questions as to where Samsung hopes to maintain their margins over the long-term.

By the end of 2014 Samsung produced 70% of the entire market’s desire for RAM, regardless of whether it was designed for use in mobile or desktop applications. That being said, we continue to see the dominance of mobile devices grow as Samsung is cutting back their production of PC RAM by 30% in order to divert their production to the production of RAM designated for use in mobile devices. It is no secret that Samsung has been a prominent supplier of components for Apple’s iPhones and iPads. Apparently the shift in production is meant to meet Apple’s expected shipments of iPhones, which is made more evident by Samsung’s reluctance to explicitly state why they are shifting production in such a drastic manner so far in the year.

Samsung’s semiconductor division generated an operating profit of $2.92 billion in Q2 2015, while the entire smartphone division failed to generate any additional profit despite the release of the critically acclaimed Galaxy S6. That being said Samsung is the only semiconductor manufacturer producing DDR4 RAM, which should be no stranger to desktop enthusiasts, though is relatively unheard of in the mobile space, as the Galaxy S6 and Galaxy S6 Edge are the only smartphone on the market that make use of this drastically faster form or RAM. Regardless how fast DDR4 RAM, and the mobile LPDDR4 RAM, will penetrate the general smartphone market Samsung is poised to continue to be the predominant manufacturer of chips in the smartphone market, regardless how much market share they capture.