During the most awaited annual Super Bowl that transpired earlier this year, Samsung Electronics Co. Ltd. (KRX:005930) awed the audience by turning the two highest floors of its new headquarters in Santa Clara into a 30 ft. by 300 ft. makeshift digital billboard. Also, anyone located beyond the Super Bowl can have a glimpse of the Super Bowl advertisements at the headquarters of Intel Corporation (NASDAQ:INTC).
Intel has always served as an inspiration for Samsung, being the leading chipmaker in the world as it supplies nearly 99% of the servers and 95% of the laptops around the world. Samsung, on the other hand, is catching up on the chipmaker race as it has been ranked next to Intel over the past few years. The memory chip venture of the Asian semiconductor company has been the fastest growing business in the industry. Given the very tight competition, the two companies are now beginning to target each other’s clients as they both vie for the top spot in the semiconductor sector.
The Growing Competition
Intel revealed last year that nearly $5.50 billion will be shelled out to bring back the production of modern memory chips at its Dalian plant in China. Brian Krzanich, Intel CEO, said during a conference call late last year that the effort is the first memory factory investments Intel has made in years.
On the other hand, Kelvin Low, Samsung Senior Director of Foundry Marketing, noted that Samsung is currently focused on producing two large sets of server chips as they compete with Intel. However, the company refused to give further details about its strategy to contend with the number one chipmaker in the world.
When desktop PCs were still dominant in the market, both Intel and Samsung complemented each other’s services. Since the smartphone era has vastly grown and ousted the PC market, everything has changed. Upfront manufacturing costs have become extremely expensive over time, making any attempt to come up with new offerings become a risk for every company. Shane Rau, IDC analyst, said that this trend is likely to continue in the long run.
According to research estimates, a new chip plant paired with the latest equipment can amount to nearly $10 billion. Machinery, for example, needs to be replaced every five years in order to maintain competence in the market.