Samsung stand at consumer show

Samsung ends Intel’s 25-year reign as dominant chip manufacturer

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Despite a year of record revenue, Intel has been toppled from its position as the world’s largest chip manufacturer by South Korean electronics giant Samsung.

Intel’s shift in fortune looked increasingly likely throughout 2017, as Samsung reported greater revenue from its chips business than Intel in its quarterly reports. In the second quarter, Samsung registered revenue of $15bn (£10.6bn) from Samsung Semiconductors alone – the electronics giant’s chip arm – while Intel brought in a total of $14.8bn (£10.5bn).

Over 2017, Samsung Semiconductors generated $69bn (£48.7bn) in revenue, while Intel trailed slightly behind with $62.8bn (£44.3bn). While this proved a record year for Intel with its sales growing 6 per cent, it was not enough to protect its long-held position as the world’s largest chip manufacturer.

Intel had been the world’s largest chip manufacturer since 1992. Its chips are estimated to be used in at least 90 per cent of the world’s computers.

Samsung is the world’s largest manufacturer of smartphones and televisions, as well as a major manufacturer of home appliances - its original focus - and electronic components. In recent years, Samsung has been increasingly focusing its research and development on mobile hardware and in particular memory chips - essentially, components for smartphones.

In the fourth quarter of 2017, Samsung’s overall earnings appeared to be largely driven by electronic components, in spite of it also being a huge home appliances and mobile manufacturer.

According to a 2017 quarterly report, in 2018 Samsung intends to focus more strongly on chips for machine learning, cloud services and automotive electronics, while also exploring new mobile technologies, such as foldable screens.

Samsung and Intel are not in direct competition in the chip manufacturing business. While Samsung is focused on memory and flash storage – both vital for mobile devices, as well as connected cars and other devices – Intel remains the world leader in x86 processors, which dominate personal computers and laptops. Samsung’s advance over Intel is perhaps most indicative of the growth of the market for memory chips and other smartphone components.

Despite this, the reports of the two company’s annual earnings will likely come as a blow to Intel, which has had a difficult start to 2018. This follows the revelation that every recently-manufactured Intel chip suffered from serious security flaws - known as Meltdown and Spectre - which could allow personal information, including passwords, to be accessed by hackers.

While there have been no reports of this vulnerability being exploited, Intel has suffered a number of backlashes relating to the vulnerability due to having concealed the flaw for at least seven months and for the company’s initial patch for the issue, which caused unexpected booting in some machines. CEO Brian Krzanich also came under fire when it was revealed that he had sold off some of his shares in the company shortly before going public about the fault.

Meanwhile, Google has closed a $1.1bn (£780m) deal with HTC in a move towards more hardware development. The Taiwan-based company worked with Google on the development of its Pixel smartphone series. The search giant will acquire 2,000 of the HTC’s smartphone research and development team, representing a serious bet on Google’s future in original hardware, potentially including purpose-built chips.

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