Samsung vice chairman Lee Jae-yong says the company will be shifting its focus more directly toward the non-memory segment of the chipset industry in a bid to spur growth, according to recent reports out of the company's home region. Speaking during a meeting with South Korean Democratic Party leader Hong Young-pyo, the executive also indicated that the transition would help Samsung uphold its responsibility to generate jobs, following a downturn in operating profits of around 28.7-percent in Q4 2018.
The downturn in memory sales stems at least partially from a continuing plateau in smartphone shipments, resulting in a decreased overall demand. Lee Jae-yong admitted that the situation has created something of a crisis for the company but that it will overcome that through innovation. Samsung will also look to foster new relationships with smaller firms to help drive growth and ensure a more diverse, dynamic market.
This shift is fundamental
The shift in focus represents what is arguably a fundamental change for the company. Rather than relying on smartphone sales alone or the collective sales of its wide range of electronics products, Samsung's business has been propped up chiefly by DRAM memory and NAND flash chip development. While that provides the company with a buffer against slow sales of its own flagships and other Android devices, it isn't perfect protection against financial losses.
Smartphone users have begun holding onto their handsets for longer between upgrades, leading to a smartphone market that has gradually slowed but that drop-off hasn't been spread equally. Samsung's own smartphone sales, for example, plunged by 18.9-percent in the third quarter of 2018 according to recent Gartner reports. By comparison, both Xiaomi and Huawei have experienced contrasting up-ticks in shipments of mid-range and budget handsets atop relatively steady flagship sales.
Since Samsung's memory business has heavily reliant on partnerships with companies such as Apple the drop in sales across the entire market it typical supplies has impacted its overall business.
In terms of Samsung's placement in the non-memory chip and foundry portion of the industry, the company actually doesn't have much of a position to speak of. Its focus over the previous years, particularly with regard to its foundries, has been on driving the size of chipsets down. That's resulted in partnerships with fairly big names in the industry, including Qualcomm, and improvements for its own chips but the Korean tech giant doesn't generally supply its chips outside of its own electronics.
The implication presented by vice chairman Lee Jae-yong is that Samsung may start offering to license its Exynos lineup, to smaller OEMs in the smartphone segment or for use in gadgets outside of that market. That would give it another foundation to stand on but would also position it in more direct competition in a market it previously hasn't really been competing in. The company may also choose to license out the use of its foundries or the technologies used in its foundries.
Any of those moves would represent a fairly massive step for Samsung.
Samsung isn't likely going anywhere
Although demand is down for smartphones overall and Samsung is losing out in lower segments of the Android market, the company doesn't seem to be going away just yet. Despite its decline, Samsung has reported record profits for 2018 and maintained its commanding lead in the market as a whole.
The tech giant is expanding outside of hardware as well, with a renewed effort to gain a foothold and eventual lead in the AI industry through its Bixby software. The company has opened that up to third-party developers and plans to include its AI in every product it sells over the next couple of years, as of its developer conference late last year. Regardless of whether that's ultimately successful, the company appears well-prepared for any leaner years for smartphones or memory chips that may be headed its way.