Samsung recently announced third quarter business figures showing that both revenue and profits had been impacted from the Galaxy Note 7 battery problem and two device recalls. Although the extent of the damage caused by the Galaxy Note 7's faulty battery will not be known for some time one of the things that the business discussed was how Samsung is a world leader in mobile memory chips and is pushing forward plans to manufacture and sell smaller and smaller memory chips. As in the System-on-Chips market, the smaller the memory chip, the lower the voltage needed in order to drive the unit and therefore the less power consumed and heat produced. Power consumption is proportional to the square of the voltage applied, which means a relatively small reduction in size and hence control voltage has a disproportionately large impact on power consumed.
Market researcher IHS released statistics showing that Samsung controlled almost 47% of the world's DRAM market in the second quarter of the year, but many competitors use 20nm DRAM chips as their main product. As such, Samsung is showing an eighteen month technological lead, which is sure to consolidate their market leading position going forwards. Currently, approximately 80% of Samsung's current DRAM production uses chips built at a 20nm construction process, with the balance at the 18nm size. However, Samsung's ambitious plans see the company reducing the size of its production DRAM units. The company's Device Services division has announced plans to roll our next generation 15nm and 16nm memory chips in the second half of next year. The company is also pushing to increase the production of 18nm chips to be between 30% to 40% of current production and is also aiming to release new 10nm DRAM chips. Samsung's 10nm small factor memory chips are reaching the market quicker than the business expected, and at the current schedule will be in mass production by early 2019 - more than a year than the business forecast in 2015.
Despite the reputational damage of the Galaxy Note 7, we do not believe the battery problems will impact Samsung's semiconductor business. Many device manufacturers use Samsung components, including the big names in the industry such as Apple. The whole smartphone industry is feeling the squeeze of plateauing sales as customers hold onto their devices for longer, but the switch into using higher tech components favors businesses such as Samsung, which have an appreciable technological advantage.