We examine Samsung Electronics' strategy for the next 10 years through the information available in the market, and explore the competitive relationship between Samsung and the major players.
New-generation communication technologies such as those concerning datacenters or LEO satellites are important strategic considerations for companies competing in the world's top market segments in the new era. Samsung has made a head-start in developing LEO satellite and next-gen communication technologies. Have you ever imagnied that South Korea could take part in a mission to the moon because of Samsung's communication technology?
The pressure on mature products during recession has underscored the strategic importance and value of high-end chips for innovative applications such as those for datacenters and Internet of Vehicles (IoV). The high performance computing (HPC) segment contributes about 10% of Samsung's foundry sales, while TSMC has already seen it reach 43% as of second-quarter 2022, exceeding even the mobile device segment's 38%. TSMC is clearly in a more advantageous position. Just like in the mainframe computer era where everyone considered IBM their first choice, the foundry to go to now is of course TSMC who insists that it will not compete with its customers.
When designing datacenters, companies such as Meta naturally would consider replacing Intel's general-purpose chips with their own customized ones featuring higher specs. This trend is even more important for network companies building datacenters that need DRAM to support fast computing. The demand for DRAM modules in datacenters has migrated from 32GB to 128GB ones, which is a significant development for the promotion of artificial intelligence (AI) and other key applications.
This trend can be seen in the gradual decline in x86 processors' market share and the role Nvidia and AMD have played in the US government's efforts to suppress AI development in China. In the past, China's demand carried significant weight, but the US-China confrontation is intensifying. The pandemic has hit hard China's economy as well as Internet giants. The current focus of datacenter constructions is in eastern China, and future datacenter development will be focused on the western regions where electricty and water bills are much lower than those in the eastern parts. The situation is changing and the demand is diverse, but we can't see any developments in favor of Samsung's changes.
South Korea will not resign itself to the role of being a second-tier country, so it will certainly seek to play a key role in the "space" age. South Korea is one of seven countries in the world that can launch 1-ton rockets, and in terms of satellite technology applications, LEO satellites have the advantage of fast transmission and are widely recognized as the key communication technology of the new generation.
South Korea has been a leader in 4G and 5G tech, and it will not be absent from 6G. Eyeing the world's top business opportunities, renowned universities such as Korea Advanced Institute of Science and Technology and Yonsei University have been contributing efforts, playing the role of proactive partners in a new form of collaboration between the industry, government, and academic sectors. Based on South Korea's industrial structure, these new technologies will find their applications chiefly through Samsung and LG in the future.
SpaceX's Starlink will enter South Korea in 2023 to develop a LEO satellite service program, and South Korea is also exploring the possibility of urban air mobility (UAM) using LTE technology. South Korea is thinking far ahead in the application environment and sees great business opportunities, and there is something that emerging economies can learn from the attitude of South Korea in the face of difficulties.
(Editor's note: This is part of a series of 10 articles by DIGITIMES Asia president Colley Hwang about Samsung's outlook.)
