South Korea’s Samsung Electronics Co. Ltd. reportedly has toppled American tech giant Intel Corp. as world’s largest chip maker by revenue.
Samsung, known for its smartphones and televisions, has ousted Intel from a title it held for nearly a quarter-century, The Wall Street Journal reported.
Samsung is expected to maintain its lead at least through the end of this year amid a shortage of memory chips, WSJ.com explained.
Samsung’s semiconductor unit posted second-quarter sales of $15.7 billion and operating profit of $7.1 billion. Intel reported quarterly revenue of $14.8 billion and operating profit of $3.8 billion.
Samsung for years had been a distant runner-up to Intel in the $365 billion semiconductor industry, according to IC Insights Inc., a semiconductor-market researcher.
Samsung expects the memory chip boom is expected to continue in the third quarter, as revenue is widely expected to benefit from sales of OLED screens to Apple Inc.
"Looking ahead to the third quarter, the company expects favorable semiconductor conditions to continue," Samsung said in a statement reported by Reuters last week. "Although overall earnings may slightly decline quarter-on-quarter as earnings weaken for the display panel and mobile businesses," said Samsung, the world's biggest maker of memory chips, smartphones and TVs.
Memory chip makers are enjoying a so-called super-cycle where increasing demand for more sophisticated devices, such as cloud-computing data center servers, requires higher numbers of more expensive chips. That has brought about a supply shortage which is pushing prices even higher and widening profit margins, Reuters reported.
“This isn’t just a one-shot deal for Samsung,” Tobey Gonnerman, executive vice president at Fusion Worldwide, an electronic-components distributor, told the Journal. “Technology won’t take a leap backwards or become less mobile, so this won’t be an anomaly for them.”
For its part, Intel has been grappling with a declining PC industry it helped found and has been pushing into making chips that power data centers and also into autonomous vehicle technology, Reuters reported.
Worldwide shipments of traditional PCs were down 3.3 percent in the second quarter from a year earlier, slightly better than expectations of a 3.9 percent decline, research firm IDC said this month.
Investors considering a dive into the tech pool should tread cautiously as high-flying semiconductor stocks may be poised for more losses in the coming weeks as a large swath of chip names reports quarterly results in a sector that may have run up too far for some investors, Reuters has warned.
The PHLX semiconductor index is up more than 20 percent on the year, powered by gains of nearly 60 percent in names such as Nvidia and Lam Research, which has helped propel the S&P technology sector higher as the best performing of the 11 major S&P sectors. Only five of the 30 names in the semiconductor index are in negative territory for the year.
Those gains were fueled by expectations of strong earnings and revenue for the quarter.
Semiconductor and semiconductor equipment stocks are expected to see the highest growth within the tech sector, with year-over-year earnings growth of more than 40 percent, according to Thomson Reuters data.
"The semis are the heart and soul of the technology sector, particularly the large-cap technology sector, and they are really driving the theme that we saw really take shape in the second quarter," said Peter Kenny, senior market strategist at Global Markets Advisory Group in New York.
"The question is are they going to be able to continue to do it and even if they are, which the street is expecting, there is a case to be made for stretched valuations triggering a little bit of rotation out of the space."
(Newsmax wires services contributed to this report).
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