Samsung Electronics (SSNLF), the South Korean consumer electronics giant that is spending $18.6 billion to boost memory chip production in its home country, could officially surpass Intel Corp. (INTC) as the world’s largest chipmaker later this week.
That’s when the company is projected to report second quarter results, which will show its best-ever profit for a three-month period driven by strong sales of memory chips. The results for Q2 are also expected to reveal it sold more semiconductors than Intel, which has long been the world's leading chipmaker. According to a report in Reuters, the operating profits for the three months ended in June are expected to jump 67% compared to a year-ago to $11.4 billion. For the quarter ending in September, Wall Street is looking for even higher profits, noted the report. The company is slated to provide its earnings guidance for Q2 on Friday but won’t provide details until the end of July. (See also: Samsung to Open World's Largest OLED Factory.)
Chip Prices Are Up
Samsung is benefiting from a surge in demand for memory chips thanks to mobile phones and other internet-ready gadgets. Late last month, Nomura Securities predicted the South Korean tech company would surpass Intel in the chip market and said DRAM chip prices increased 25% in the first half of 2017, while NAND flash memory chip prices jumped 15%. The Wall Street firm thinks the average selling prices will continue to increase in the third quarter as well. Demand from data center customers and for solid-state hard drives is also boosting shipments and thus the company’s market share compared to Intel. (See more: Does Samsung Have Even More Profit Upside in Q2?)
While a lot of the focus has been on the success of Samsung's Galaxy 8 line of smartphones, the company has been making strides in recent months to better position its chipmaking business. Back in May, reports surfaced that it is creating a new contract chip manufacturing unit that will be charged with making mobile chips and other non-memory semiconductors for customers. The business is being headed by Kim Ki-nam, the president in charge of the semiconductor unit. For its first quarter, 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. The company is also 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.