No, Samsung Doesn’t Outspend Intel on Chip Technology

There seems to be a public misconception that Samsung (NASDAQOTH: SSNLF  ) spends more on leading-edge logic semiconductor development than Intel (NASDAQ: INTC  ) does. This has been the primary reason why some investors believe that Samsung will one day match, and then exceed, what Intel does vis-a-vis chip building. While Samsung may very well do so -- though personally I'm not betting on it -- it won't be due to the South Korean giant outspending Intel.

How much does Intel spend on chip manufacturing R&D?
If you rewind back to Intel's 2012 investor meeting, you'll note that Intel did us the courtesy of breaking down how it allocates the roughly $10 billion/year in R&D into various buckets:

Source: Intel.

If you'll notice, Intel allocates greater than $2 billion/year just on technology development, which is the short way of saying process technology development. Also note that these numbers are vintage 2012. If we fast forward to the 2013 investor meeting, you'll see that 2014 spending on process technology R&D should be up more than 10% from 2012 levels:

Source: Intel.

We can reasonably assume that Intel spends about $2.5 billion/year on developing its leading-edge manufacturing technologies. To put this into perspective, TSMC (NYSE: TSM  )  -- the world's leading independent semiconductor contract manufacturer -- has spent about $1.64 billion on R&D during the last 12 months, with that run rate more than double the amount the company spent in 2010. Developing leading-edge manufacturing technology is getting harder and more expensive.

TSM Research and Development Expense (Annual) Chart

TSM Research and Development Expense (Annual) data by YCharts

How about Samsung?
While we know what Intel and Taiwan Semiconductor spend, the question now turns to Samsung. There have been claims that Samsung is spending roughly double what Intel is spending on manufacturing technology R&D, but digging around reveals that this isn't even remotely the case. Indeed, a recent report from firm IC Insights published in February of this year put Samsung at $2.82 billion in semiconductor R&D spending during 2013, up 2% from 2012 levels.

Note that the vast majority of Samsung's semiconductor business actually consists of DRAM/NAND rather than logic semiconductors. (According again to IC Insights, Samsung's total logic revenue came in at $3.95 billion. ) In addition to DRAM/NAND flash development, Samsung develops logic processes, as well as various chips (such as image sensors, Exynos apps processors, and cellular basebands). Given the R&D intensity of these activities as a whole, it's tough to believe that Samsung is spending anywhere close to $2 billion on just logic process development.

Foolish bottom line
Samsung is a large, powerful company. and has its fingers in a lot of pots, but even its resources are not unlimited. A great deal of hype has surrounded the company's logic process development ever since Samsung/GLOBALFOUNDRIES announced their "fab-sync" deal for Samsung's 14-nanometer process. While Samsung certainly appears to have ambitions to attract more customers to its foundry business (particularly as its main client Apple seems to be defecting to TSMC), it seems a bit farfetched to assume that Samsung is going to "catch-up" to Intel in logic manufacturing technology anytime soon.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 07, 2014, at 3:20 PM, ta152h wrote:


    Thanks for a very helpful article. I've read in so many places that Samsung is spending twice what Intel is, I had accepted it as truth. I wonder how it spread so quickly, even on tech savvy sites that are pretty trustworthy.

    Maybe they are referring to the alliance as a whole? I have to say, I'm a little surprised IBM is at 22nm with Power 8, and no one is taking advantage of their fabs to any real extent. It also makes me wonder why IBM has caught Intel (for the time being, but not for much longer) but their 'partners' are obviously going to languish with low performance 20nm node, and only in 2016 move to something better. With GF having to 'license' Samsung technology, one has to question what is, and is not, being shared between partners, and what they are getting from the alliance. Obviously, not everything is being shared freely.

  • Report this Comment On June 07, 2014, at 6:04 PM, TMFAeassa wrote:


    You're very welcome! :-)

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2986076, ~/Articles/ArticleHandler.aspx, 8/29/2015 2:31:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Ashraf Eassa

Ashraf Eassa is a technology specialist with The Motley Fool. He writes mostly about technology stocks, but is especially interested in anything related to chips -- the semiconductor kind, that is. Follow him on Twitter:

Today's Market

updated 5 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
INTC $28.42 Up +0.70 +2.53%
Intel CAPS Rating: ****
SSNLF $875.00 Up +25.00 +2.94%
Samsung CAPS Rating: ***
TSM $20.00 Up +0.06 +0.30%
Taiwan Semiconduct… CAPS Rating: ****