Intel is facing increasing competition in the worldwide semiconductor industry, but not from its traditional rival, Advanced Micro Devices.
Samsung Electronics came closer to challenging Intel's leadership position in the global chip market in 2010 than any company had in more than a decade, according to a report released Tuesday by the research firm IHS iSuppli.
Last year's final market share rankings came in showing Samsung, which is based in South Korea, in the number two position with a 9.2% share of global chip revenue, up from 7.6% in 2009. That means Samsung was just 4.1 percentage points behind long-time market leader Intel, which is based in the US.
By contrast, 10 years ago Intel's market share of 14.9% was more than three times that of Samsung, which came in at 3.9%. In 2001, Samsung was in number five position in the global semiconductor market. In the past decade, Intel's market share has hovered between 11.9% and 14.8%.
"The rise of Samsung is one of the biggest stories of the last decade in the worldwide semiconductor market," iSuppli analyst Dale Ford said.
"When experts discuss competition for Intel, they almost always focus on AMD. While it is true that AMD is Intel's major competitor in the microprocessing unit market, Samsung is the primary rival of Intel for overall semiconductor market share," Ford said.
So what has caused Samsung to gain so much on Intel? The company's growth largely has been based on its "booming" sales of memory integrated circuits, according to iSuppli.
The research firm also noted that the biggest growth driver in the memory segment of the semiconductor market last year was dynamic random access memory (DRAM), which increased by 75%. The other major segment of the memory market, NAND flash, grew 38.6% for the year.
Samsung was perfectly placed for growth since the company is the leading worldwide supplier of DRAM and NAND. Thanks to that positioning, the company showed a 59.1% increase in semiconductor revenue last year, "massively" outperforming the overall chip market.
"The memory market right now is pretty hot and a lot of that is going into smartphones and tablets," said Rob Enderle, an analyst with the Enderle Group.
"Intel lives on processors and the PC market hasn't shown nearly the strength of tablets. That positions Samsung very nicely against Intel. Samsung is much better invested in the markets that are growing rapidly than Intel is at this point," Enderle said.
Tablets such as Apple's iPad and iPad 2 are thrashing the PC market. Just last week, industry analysis group IDC reported that global PC shipments dropped 3.2% in the first quarter compared with the same period last year. Gartner also reported a decline, but reported a smaller drop, 1.1%.
What did analysts largely blame for the lack of interest in PCs? Tablets are capturing users' attention and keeping them from wanting to invest in a bigger computing device.
Samsung is well positioned since it manufactures its own tablet chips, as well as chips specifically for the iPad and iPad 2.
Enderle said Intel should be concerned. "[Intel] should be very worried," he said. "They're trying to get into these markets and they're resourcing it at the highest levels they've ever spent. But is it enough? They're coming at this from behind."
Enderle also noted that just last month Intel replaced the head of its mobile group. "Obviously, they don't think [what they had been doing was] enough either," he said. "I expect they'll really ratchet up their [mobile, tablet] efforts by the end of the year."
On Tuesday, Intel reported growth in revenue and income for the first quarter of 2011 , driven by the addition of new products and strength in the enterprise market.