Samsung should watch out for complacency like Intel.

T.is here A good story about Samsung’s entry into the silicon chip business, which in 1983 was dominated by Japanese and American manufacturers. zaibatsu, announced a new strategy in what he proudly called the Tokyo Declaration. He said his country lacked raw materials such as oil, but had an educated, hard-working workforce and was well-equipped to try its hand at chip manufacturing. As Geoffrey Cain recounts in his book Samsung Rising, shortly afterward, some of Samsung’s executives were sent from Seoul on an overnight march across the mountains to bolster them for the challenge. They arrived at Samsung’s first semiconductor factory, built in a record six months, and signed a pledge to make the business a success before breakfast. After that he worked 16 hours a day without sleep.

Call it true grit, or call it Samsung’s martial arts-style work ethic. For over 30 years, we have been the world leader. DRAMused for memory storage in computers and servers, and more than 20 NAND Flash memory used in mobile phones. But beyond 2021, memory chips are at the forefront of the semiconductor industry’s boom-bust cycle, starting with shortages, followed by a surge in capital spending, and now at least the worst slump since the global financial crisis in 2019. It is 2007-09. Samsung Electronics, which includes the conglomerate’s semiconductor, display and consumer electronics divisions, is feeling the pain. On April 7, it announced that it would cut production of memory chips while forecasting a modest profit in the first quarter. This is an attempt to reduce market oversaturation.

In the memory chip business, Samsung’s dominance has long been unwavering. Through periodic market downturns, it has always been a “last man,” says industry forecaster Malcolm Penn of Future Horizons. , providing economies of scale to weather price declines longer than competitors. The company’s smartphone business isn’t growing as fast as it once did, but it’s still generating reliable cash flow and helping it invest in chip cycle troughs. When others struggled, it devoured market share. This has reduced him from nearly a dozen large competitors in the 2000s to two today.SK Korea’s Hynix and America’s Micron. Samsung takes the lead with his more than 40% of global sales.

In recent cycles, it has resisted production cuts for a long time.Its surrender came after months of bewilderment SK Hynix and Micron said they would curb production. But what was interesting was the effect. Samsung’s stock surged, as did those of its two rivals. A simple explanation for the uptick is that whenever market leaders throw in the towel, it’s a sign that the bottom of the slump is near. Maybe Samsung’s position at the top of the memory triumvirate is so easy it doesn’t want to win more business from its rivals. It may bring stability to the market. It’s also a signal of complacency that makes Lee confess.

There was a hint of complacency in the investor presentation last November. Memory sales chief Han Jin-man acknowledged that memory chips are sometimes considered a commodity, with prices fluctuating according to volatile capital expenditures. But he argued that capital spending has remained stable over the past decade. DRAM The trio invested reasonably and the market was more balanced. DRAM This market is expected to triple to nearly $300 billion by 2035, rather than go after competitors’ market share.

Ang Lee’s typical self-satisfaction can be seen in other fields as well.Samsung has lost some of its innovative edge DRAM and NAND manufacturing technology up to SK Hynix and Micron are the opinions of Pierre Ferragu of New Street Research, an advisory firm. “You become complacent when you’re no longer fighting for your life,” he says. Similar sentiments pulled US chip-making champion Intel off its pedestal in the late 2010s when it began to lose ground in cutting-edge “logic” chips for data processing. TSMC to Taiwan and Samsung itself.

Samsung’s goal of becoming the number one logical processor contract manufacturer by 2030 also looks off track, for reasons well known to Intel. Non-memory chip sales are the most valuable component of his $575 billion global semiconductor market. They are also of paramount strategic importance, with many governments pushing into chip manufacturing for national security interests. Last month, the South Korean government announced plans to build the world’s largest semiconductor cluster in Yongin, near Seoul.

Can’t be cut by scraping

That may not be enough to lift Samsung’s share of logic chip contract manufacturing to more than 16%. TSMC They have high manufacturing capabilities and are probably ahead in chip architecture.rival TSMCIt controls up to 58% of its lucrative market.Possible conflicts of interest scare customers like Apple, which competes with Samsung’s smartphones.

Ferrag doesn’t think Samsung will relinquish its leadership position in memory the way Intel has done in logic.it’s the first DRAM-A manufacturer that bets heavily on extreme ultraviolet technology, which is an advanced manufacturing technology. Logic and Memory have committed to spending a total of $230 billion on new fabs over the next 20 years. Still, Samsung will succeed in rediscovering the inner Lee. Otherwise, you risk succumbing to the sense of entitlement that comes with being a national champion. Look at Intel. ■

Read the article by Schumpeter, a columnist on global business.
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