Top memory manufacturer Samsung Electronics serves many clients, but the company's internal mobile division is its most important customer for the NAND flash and mobile dynamic random access memory (DRAM) products it produces, according to a new DRAM Dynamics report from information and analytics provider IHS.
Samsung's mobile group, which makes smartphones and tablets, consumed in the first quarter of this year a plurality of the mobile DRAM and NAND bit shipments produced by the company's semiconductor division, at 39 percent and 33 percent, respectively. Those numbers are up from 29 and 31 percent for their respective segments one year ago in the first quarter of 2012. Even more remarkable, the latest numbers represent dramatic increases from 18 and 13 percent, respectively, posted during the same time in 2011.
The dramatic expansion in just two years illustrates how quickly Samsung has risen in the mobile space, where its highly regarded smartphone and tablet offerings now vie for market leadership with Apple Inc.'s iPhone and iPad.
Samsung's memory division continues to be the most important segment of its semiconductor business, just as Samsung's microchip trade was, for many years, the foundation of its electronics business.
Samsung's semiconductor revenue was equal to the revenue of the mobile device group for five years until 2010. Since then, however, the mobile group has grown by leaps and bounds, and its revenue is now nearly four times larger than the semiconductor group's.
Meanwhile, such tremendous growth has focused attention on the mobile group itself, especially with Samsung mobile devices being the largest customer for Samsung mobile DRAM and NAND.
A double-edged sword for Samsung
Given such an arrangement, there are several benefits for both the memory and mobile device groups at Samsung. A clearer understanding is in place between the two groups as they work within the same company, and the memory group also has improved visibility of its own production of memory chips. Meanwhile, the mobile device group has a better understanding of the memory road map as well as of future device capabilities to be obtained from NAND and mobile DRAM being produced down the line.
Similarly, the signal path is much shorter than with traditional external customers. If there is an expected memory shortfall, the mobile device group knows immediately and can plan accordingly. Conversely, if there is an upside or downturn in smartphone or tablet demand, the memory group can adjust its chip output more quickly than if it dealt with an outside customer.
To be sure, it is not clear how much the two internal groups share information and collaborate. Overall, however, it is reasonable to assume that there is greater sharing and collaboration taking place than what would normally occur between a manufacturer and an external buyer. And such collaboration can only be beneficial for Samsung, IHS believes.
Still, such benefits do not come without a cost. Should Samsung's mobile group ever need to go to external buyers if the time comes when its own smartphones and tablets encounter a decline in sales, a conflict could ensue. Any external customer courted by Samsung's memory group is likely to be in competition with the parent company, and there would be no incentive for an outside buyer to purchase memory from the very entity it is battling in the marketplace.
For now, Samsung's vertically integrated strategy appears to be working to its advantage beautifully. All eyes are on the mobile devices group, however, to see if it can keep up its spectacular run of success. Should the group stumble, a sizable knock-on effect would be inevitable for the memory group as well.
Read more >> Samsung's Biggest Customer: Samsung