Samsung strengthens production of application processors

Sluggish demand for memory chips has forced Samsung to focus more on non-memory chips and the foundry business. The company has reportedly begun investing resources to expand the production of application processors and other non-memory chips. According to industry researcher IC Insights, memory chip business could suffer about 20% decrease in sales.

5G may help Samsung reinforce its non-memory business

Introduction of 5G networks will bring about a variety of new services for things like self-driving cars and internet of things (IoT) systems. These next-gen services will find a greater use of application processors (AP). And sensing this opportunity, Samsung has begun boosting its capability in manufacturing APs.

As of 1H 2018, Qualcomm leads the global AP market with a 45% market share, according to Strategy Analytics. The US chipmaker is followed by Apple and Samsung with 17% and 14% market share, respectively. Samsung wants a stronger hold in the market, and may even seek to acquire Eindhoven-based NXP Semiconductors, a global supplier of automotive semiconductors. Interestingly, Qualcomm had tried to take over NXP in 2016, but to no avail. Samsung, however, is said to have enough capital to finance merger and acquisition deals, which is estimated to be about $44 billion.

Another strategy that Samsung may take if it fails to acquire NXP is opening up the market in APs for cars. Qualcomm currently focuses more on APs for smartphones. Samsung has already launched Exynos and ISOCELL Auto chips for vehicles. That acquisition may not pan out, though, as Samsung denied rumors about making a move for NXP.

Samsung will also focus on other non-memory chips, as Vice Chairman Lee Jae-yong made it clear during his visit to the company’s Hwaseong semiconductor plant in Gyeonggi Province. “We will nurture the non-memory sector, including the system semiconductor and foundry business, as future growth engines,” he said.

Samsung is trying to position itself as a dominant player in the 5G network equipment business. And ahead of the impending 5G rollout, the company is rightly focusing on non-memory chip products. Huawei’s troubles in the US and other western markets may also present Samsung with market opportunities.