To compensate for the reduced demand for memory chips, Samsung plans to improve the competitiveness of its Exynos-branded application processors, a recent report from South Korean media claims. According to the publication Korea Times, strengthening its chipset offerings allow the South Korean tech giant to fully take advantage of new business opportunities brought by the introduction of 5G networks, as chipsets will not only be used in smartphones but also cars and Internet-of-Things devices. It will also reduce Samsung’s dependence on memory chips since the South Korean tech firm is facing a 20-percent decrease in sales due to the sluggish demand for memory chips.
However, at this point, it can be difficult for Samsung to compete with Qualcomm in the smartphone chipset market. According to the research firm Strategy Analytics, Qualcomm currently has a 45-percent share in the total units of handset chipsets sold in the first quarter of 2018, while Samsung is presently at third place behind Apple with a market share of 14-percent. According to industry insiders, Samsung will likely focus its efforts on developing processors for self-driving vehicles, instead of competing with Qualcomm head-on in the smartphone chipset market. The South Korean tech giant launched two semiconductor offerings for cars late last year, called the Exynos Auto and the ISOCELL Auto. Exynos Auto features multiple custom-designed CPUs and an advanced GPU that provide sufficient power for the vehicles to run various operating systems across multiple displays. Meanwhile, the ISOCELL Auto features improved light sensitivity and image resolution, allowing the sensors to offer accurate detection of objects and roadways even in poor lighting conditions
To expand its current offerings and acquire useful patents for its chipsets, Samsung will also likely acquire other semiconductor companies. Industry analysts expect that Samsung will acquire NXP Semiconductors, a major producer of processors for vehicles, and this acquisition may cost the South Korean tech giant as much as $44 billion. Furthermore, Samsung has plans to boost its production of chipsets, likely through the construction of new semiconductor plants or modification of existing ones.
Background: Industry analysts already predicted the slowdown in the growth of sales of memory chips since at least early 2018, and recent reports indicate that the situation could become worse for manufacturers of memory components. Aside from improving its chipset offerings, Samsung is also strengthening its foundry business by enhancing relationships with its business partners and expanding towards specific chip segments, like semiconductors for IoT devices and artificial intelligence. Samsung hopes that the improved performance of its foundry operations will compensate for lower sales of memory chips. Furthermore, even though Samsung’s focus is on chipsets for vehicles, the South Korean tech giant is also offering its smartphone processors to other handset makers. A recent rumor emerged claiming that Motorola is developing a mid-range handset that sports an Exynos processor.
Impact: Samsung Electronics continues with its efforts to diversify and expand its portfolio to reduce its dependence on a few products. In addition to reduced memory chip sales, it is also facing increased competition in the smartphone market, which will also affect the company’s revenue and profit. Aside from ensuring the stability of the company in the long-term, these measures should also allow Samsung to continue generating jobs in the tech firm’s home region.