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Samsung Electronics Chip Unit Set To Dethrone Intel Amidst Record Growth

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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Profits were led by strong demand for smartphone and server memory, while Samsung’s flagship Galaxy Note 8 boosted handset growth

The Galaxy Note 8
The Galaxy Note 8

Samsung Electronics has announced record quarterly profits, led by strong semiconductor sales that are nearly certain to see it surpass Intel as the world’s largest computer chip maker this year.

The company reported a 14.5 trillion won ($12.91bn, £9.8bn) operating profit for the July to September quarter, nearly triple that of the same period in 2016, while revenue grew 29.8 percent to 62tn won.

Strong global demand for memory chips saw the quarterly operating profit for Samsung’s semiconductor unit post its strongest results to date at 10tn won, up from 3.4tn won in the third quarter of last year.

That growth offset sequential profit declines in the company’s handset and display businesses.

Intel dethroned

The figures mean Samsung is likely to become the world’s largest chip vendor this year, with $17.8bn in chip sales for the third quarter compared to about $16.1bn for Intel.

Worldwide memory chip demand is seeing strong growth, with overall memory revenues expected to grow by 58 percent this year, including a 72 percent rise for DRAM and a 44 increase for NAND, according to IC Insights. Samsung is the market leader in the two segments.

Samsung supplies memory chips to rival handset makers including Apple, and as such its chip growth for the quarter was bolstered by several high-profile smartphone launches by such third parties. Cloud infrastructure expansion also fuelled server demand.

Samsung said the areas in which it saw increased demand included data centre NVMe SSDs, a type of high-performance solid-state disk. Samsung also cited trends toward higher density in cloud services as fuelling demand for server memory.

The company said it expects NAND supply to remain tight in the fourth quarter and said it plans to expand its 1nxm process migration for DRAM production during the period, amidst high expected seasonal sales of smartphones and PCs and continued data centre expansion.

Its handset business recorded strong shipments due to the launch of the flagship Galaxy Note 8, with more than 4 million sold since its launch in mid-September, as sales of the earlier Galaxy S8 slowed.

Mobile profit jumped to 3.3tn won from 100bn won last year.

Executive reshuffle

The company on Tuesday announced a major executive reshuffle that included naming its chief financial officer as chairman of the board.

The move follows the departure of several of the company’s top figures, with Samsung Electronics chief executive and vice chairman Kwon Oh-hyun stepping down from management on 13 October.

Kwon was said to be effectively Samsung’s No. 2, and his departure followed the imprisonment of de facto head Lee Jae-yong on corruption charges.

Kwon, who led the chip business and was credited with its growth, said Samsung faced an “unprecedented crisis” even as it continued to expand.

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