Wednesday, July 12, 2017

Samsung’s profits will decrease in 2019, predicts Gartner

Samsung Electronics, the world’s largest memory chip supplier, will rank top in the global semiconductor market for the first time in the first quarter of this year, stealing the crown from Intel, predicts IT market research firm Gartner.

Last week, Samsung said it will post a record operating profit of $12.2 billion in the second quarter, but eager to put a damper on the situation, Gartner pointed out that profits will decrease in 2019 when Chinese firms enter the market.

“The market bubble will disappear in 2019 as memory vendors increase new supply and Samsung will lose most of profits to be earned this year and next year,” said Android Norwood, Research Vice President at Gartner.

It’s believed that the bubble was caused by a recent shortage in memory chips, which manufacturers, including Samsung, decided to use to their advantage by raising the price of DRAM and NAND.

Like any boom, things quickly come to an end when a supplier is able to offer a low price per unit, and that’s exactly what Gartner forecasts will happen when China-based manufacturers storm the market in the coming years.

It’s unlikely that Samsung will be able to match the price of the Chinese companies, as it costs a lot more to produce chips in dedicated plants in South Korea than it does in multipurpose factories China.