The share price of the US semiconductor company Intel has plummeted. Intel closed at $49.64 on the Nasdaq Stock Exchange on the 22nd, down 11.68% from the previous day. It is the lowest level this year and the lowest in 10 months since it recorded $48.75 per share on December 30 last year.
The ostensible reason is PC makers’ decline in shipments. This is because pent-up consumption is slowing due to COVID-19 and other semiconductor chips such as power management chips are also lacking.
However, experts are diagnosing that Intel’s business structure is fundamentally shaking. Intel specializes in making central processing units (CPUs) for computers, but in the global market, demand is shifting to wireless communication devices such as smartphones and tablet PCs.
Intel insensitive to change
Intel is still the No. 1 company with a 16% share in the semiconductor market. However, recently, Intel’s largest customers are declaring ‘Leave Intel’.
Apple is an example. Experts believe that Intel’s insufficient development of low-power semiconductors is one of the reasons why Apple missed out. CPUs made by Intel are used in laptops or PCs. These are devices that consumers always use with power plugged in. As a result, there was little need for development of low-power semiconductors.
On the other hand, AP manufacturers, which act as CPUs for mobile devices, focused on developing low-power semiconductors. This is because the power consumption of semiconductors had to be reduced to a minimum in order to maintain a mobile device on battery alone.
On the 18th (local time), Apple unveiled a new high-performance laptop ‘Macbook Pro’ equipped with its own design chip ‘Apple Silicon’. According to Apple, the M1 Pro and M1 Max are upgraded versions of the already announced ‘M1’, and are the most powerful among notebook chips, while significantly lowering power consumption to increase efficiency. An industry official said, “Apple must have decided that it would be difficult to obtain a product with the desired performance with Intel semiconductor chips.”
Japanese semiconductors also collapsed because they could not read market changes
There are many cases in the semiconductor market where they failed to read the changes and went down the road. The collapse of Japanese semiconductor companies is a prime example. Japanese semiconductor companies such as Hitachi, Toshiba, NEC, Fujitsu, and Mitsubishi accounted for 80% of the global memory semiconductor market in the 1980s.
Japan was able to rise to the top spot in the semiconductor world by producing high-performance DRAMs required by large servers for servers. However, with the spread of personal computers (PCs) in the 1990s, the main consumer of DRAM began to shift rapidly from large computers to PCs.
Semiconductor companies faced the homework of lowering prices and reducing sizes because individual consumers had to purchase them. However, Japanese companies were engrossed in ‘excess technology and excessive quality’ and could not cope with the rapid flow of the global market.
On the other hand, Samsung Electronics did not miss this opportunity. In order to lower the price, it boldly introduced semiconductor equipment from European companies that had been evaluated as having weak competitiveness compared to Japan. While Japan insisted on producing all of its equipment and parts in-country, Samsung Electronics has properly airlifted equipment and parts that are relatively low-priced and capable of producing high-quality products.
Japan restarts resurrection… Did you learn lessons from the past
But recently, Japan is changing. In the past, they insisted on domestic production of all semiconductor equipment and parts, but now they are actively trying to attract foreign semiconductor companies.
Taiwan’s TSMC, the world’s largest foundry (semiconductor consignment production) company, recently announced that it plans to build a new factory in Japan to produce 22-28 nm (nanometer, 1 nm = 1 billionth of a meter) process semiconductors.
TSMC will start building a Japanese factory in Kumamoto Prefecture, where Sony’s semiconductor factory is located, in 2022, and mass production is scheduled to begin in 2024. The Japanese government is considering subsidizing 500 billion yen, which is half of the investment in TSMC’s new plant. In addition, it is reported that US semiconductor company Micron plans to invest up to $6.98 billion to build a DRAM factory in Hiroshima, Japan.
“Lee Jae-yong, it’s time to show your unstoppable side”
Samsung Electronics Vice Chairman Lee Jae-yong visits the ‘Samsung Youth Software Academy (SSAFY)’ training site in Seocho-gu, Seoul where Prime Minister Bu-gyeom Kim attends on September 14. /yunhap news
While the semiconductor market is rapidly changing, some investors are calling for Samsung Electronics Vice Chairman Lee Jae-yong to be more active.
The British weekly magazine ‘The Economist’ published a special article titled ‘Samsung Electronics wants to dominate cutting-edge chipmaking’ on the 17th. The Economist described the present moment as a ‘critical new chapter’. This is because Vice Chairman Lee was recently released and the succession process is over.
The media emphasized, “Vice Chairman Lee’s top concern is the revival of semiconductors, especially in the field of system semiconductors, to secure a leadership similar to that of memory semiconductors.”
“He is known for being unpretentious and dignified and insightful, but now he will have to be ruthless to ensure success,” he added. Regarding the recent weakness in Samsung Electronics’ share price, he predicted that “the company can offer an alternative to a spin-off or an overseas listing to raise the stock price.”
The industry believes that a bold M&A could be an alternative for Samsung Electronics to increase its market share in system semiconductors. An industry official said, “Just as the late Samsung Chairman Lee Byung-cheol entered the semiconductor industry in 1974 by acquiring Korean semiconductors with his own money, M&A with other competitive system semiconductor companies may be the fastest way to increase market share.” .
Reporter Park Shin-young nyusos@hankyung.com
