Aiming to lure more semiconductor customers, Samsung Electronics Co. (SSNLF) is creating a new contract chip manufacturing unit that will be charged with making mobile chips and other non-memory semiconductors for customers.

Reuters, citing Samsung, reported the new contract chip manufacturing business will be headed by Kim Ki-nam, the president in charge of the semiconductor business for the South Korean electronics company.  For some time now speculation has abounded that Samsung would create a separate foundry business that would not interfere with its own chip business. By making it a stand-alone business, Samsung will likely draw more customers given concerns that Samsung could get a hold of client secrets that would aid its own chips are diminished.

Reuters noted that while sales from Samsung’s existing foundry business isn’t that huge, it has been growing. Citing estimates from market research firm IHS, Reuters reported sales at Samsung’s foundry business increased 86% in 2016 to $4.7 billion. Samsung will be competing against other semiconductor contract manufactures such as Taiwan Semiconductor Manufacturing Co. (TSM) with its new unit. (See more: How Taiwan Semiconductor Manufacturing Makes Money)


For Samsung, going after new customers in the chip market comes at a time when that side of its business is booming, with one research firm predicting it could displace Intel Corp. (INTC) as the world’s largest producer of semiconductors. Earlier this month, IC Insights predicted in a new research report that Samsung could become the number one chip supplier in the second quarter of this year. “If memory market prices continue to hold or increase through 2Q17 and the balance of this year, Samsung could charge into the top spot and displace Intel, which has held the #1 ranking since 1993,” wrote IC Insights in the report. If Samsung is able to achieve that status, the report noted it would be a huge milestone for the South Korean consumer electronics company. Other semiconductor companies have tried to unseat Intel for years as the world’s largest supplier of semiconductors to no avail.

For its first quarter, Samsung said its chip unit generated $5.6 billion in operating income, which is more than double the results from a year earlier. While the first quarter is typically a slow one when it comes to chip sales, Samsung is benefiting from a movement toward devices that have more chips embedded in them including memory. Samsung is also seen benefiting from the expected tight supply of memory chips this year, as the market leader, Toshiba, is preparing to sell its chip unit due to other liabilities.  (See more: Samsung Expects Record Q1 Profits: Thomson Reuters)





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