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Samsung Electronics Expects a Tough Year Ahead For The Chip Industry

Tech giant Samsung has just announced that it expects 2016 to be an especially weak year for the chip industry due anemic global economic conditions and fierce competition between competitors.  This announcement also comes in the wake of a speech recently made by Samsung CEO Kwon Oh-hyun in which he warned of low growth projections over the coming year. Although financial specifics were not mentioned during the speech, Oh-hyan told employees and investors that earnings for Q4 2015 will be lower than expected due to the aforementioned global economic instability as well as low seasonal demand for components.

Those following the semiconductor industry expected slower growth in 2015, but not to such a large extent.

Negative impact from weak demand and falling sales prices for semiconductor and liquid crystal display industries was likely bigger than initially anticipated," brokerage Korea Investment said in a report issued separately on Monday.

As new products and companies continue to enter the smartphone industry, chip makers have come under even more stress to provide cheap and efficient semiconductors. These companies continue to undercut one another to win contracts, profit margins decreases and it becomes increasingly more difficult to stay afloat.  As a result, the chip industry has seen an immense number of mergers and acquisitions over the years.  Increasing economies of scale has become one of the few ways for chip makers to maintain competitive.

In fact, Samsung is even rumored to be in competition with TSMC to provide Apple with chips for the next iPhone iteration. If TSMC were to win this contract, it would be a massive blow to Samsung’s Electronics Arm.  Chips have become an essential part of daily, and instances such as this will become even more common place as chip makers battle for clients and prominence.


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