CompanyGraph
Samsung Electronics Co., Ltd.
005930 · KRX · South Korea
Runs South Korean chip factories whose output must be split between selling to Apple and Xiaomi and supplying its own Galaxy phones.
Samsung operates South Korean cleanroom fabs that produce the DRAM and NAND flash memory chips used inside Galaxy smartphones and sold externally to Apple, Xiaomi, and data center operators — and because building a new fab takes 18 to 24 months of construction before a single extra chip comes out, the total number of chips available in any given quarter was fixed nearly two years earlier. That hard ceiling means Samsung's Device Solutions division, which sells memory to outside customers, and its Device Experience division, which consumes the same chips for Galaxy production, are always competing for the same finite output. When a shortage hits and Samsung diverts wafers toward Galaxy, Apple or Xiaomi faces a choice: wait, or spend 6 to 12 months qualifying a rival supplier — and once that requalification is complete, Samsung loses that revenue permanently. So the same feature that makes Samsung unusual — sitting on both sides of the memory supply chain at once — is also what forces it, at the worst possible moment, to choose between protecting its smartphone business and keeping its biggest external customers.
How does this company make money?
Samsung earns money each time it sells a memory chip to an outside customer like Apple or a data center operator. It earns money each time it sells a Galaxy smartphone or home appliance, typically through carrier partnerships and retail stores. It also bills customers for foundry services — processing semiconductor wafers on their behalf — charging by the volume of wafers run through the factory.
What makes this company hard to replace?
Businesses using Galaxy devices on the Samsung Knox enterprise security platform would need their IT departments to recertify every device and policy for a competing system — a significant project that most companies delay as long as possible. Memory chips designed into a customer's product, such as an iPhone circuit board, require 6 to 12 months of requalification testing before a replacement chip from a different supplier can be used. Samsung Pay users in South Korea face an additional barrier: connecting a competing payment platform to Korean banking systems requires separate regulatory approval.
What limits this company?
The total number of chips Samsung can ship in any quarter was decided 18 to 24 months before that quarter arrived. Building new cleanroom space takes that long, and the process cannot be sped up no matter how much money is available. So when a shortage hits and demand spikes, there is no lever to pull — the ceiling is already set.
What does this company depend on?
Samsung cannot run its advanced memory factories without ASML extreme ultraviolet lithography machines, which are the only tools that can print the smallest chip features. It relies on Japanese suppliers like Shin-Etsu for the silicon wafers those factories process. Its Galaxy phones require specialized memory controller chips, Samsung Display OLED panels made in separate facilities, and Google Android operating system licensing to run the software.
Who depends on this company?
Apple's iPhone production lines use Samsung DRAM and NAND components, and switching to a different supplier would require months of requalification testing — meaning a sudden loss of Samsung supply would stall iPhone manufacturing. Chinese smartphone makers like Xiaomi use Samsung memory in their flagship devices and face the same requalification delay. Global data center operators run Samsung SSD storage across their systems, and replacing those drives would require extensive compatibility testing before any alternative could go live.
How does this company scale?
The cost of designing a memory chip or writing Galaxy software gets cheaper per unit the more units Samsung ships — spreading a fixed development bill across millions of devices. What does not get cheaper or faster is building the next factory: cleanroom semiconductor fabrication cannot be shared across product lines and must be added in discrete jumps costing multiple billions of dollars each, with an 18 to 24 month wait before a single extra wafer comes out.
What external forces can significantly affect this company?
US-China semiconductor export restrictions limit which advanced chipmaking equipment Samsung can use when expanding production capacity in certain markets. Fluctuations in the Korean Won affect how price-competitive Samsung's chips are against rivals like TSMC and Chinese memory manufacturers. EU right-to-repair regulations require Samsung to keep components available for longer periods, which means holding more inventory and paying more to store it.
Where is this company structurally vulnerable?
If Apple used a period when Samsung was prioritising Galaxy production — and therefore short-shipping memory to external customers — to complete the 6 to 12 month process of qualifying a different memory supplier, Samsung would lose that revenue permanently. The very mechanism that gives Samsung supply-chain power over competitors is the thing that pushes those competitors to find alternatives. Every shortage forces Samsung to choose between protecting Galaxy volume and protecting external customers, and there is no choice that keeps both.