Instead of splurging cash, a structural change must occur to catch up with TSMC, a No. 1 foundry player with a global market share of 58 percent as of second quarter this year, they said.
“Global IT firms such as Apple go to TSMC, because Samsung Electronics is a competitor. Samsung manufactures chips for customers, but also for itself too. Apple can’t risk its chip info get into the hands of its rival,” said, Yoo Hoi-jun, a professor of electrical engineering at the state-run Korea Advanced Institute of Science & Technology.
“Samsung Electronics has to make a choice. It has to either split off its foundry business or system LSI business -- which designs chips -- to ensure clients that their chip info isn’t shared between the two businesses. But as far as I know, the firm isn’t considering a split-off,” Yoo said.
Of the world’s top 10 customers of advanced 5-nanometer and 7-nanometer chips, only four of them -- Qualcomm, Nvidia, IBM and Samsung Electronics itself -- are clients of Samsung’s foundry service.
Considering that Qualcomm and Nvidia also place foundry orders with TSMC, should the quality of Samsung Electronics’ foundry decline, they can always migrate to the Taiwanese company.
Other experts further warn that Samsung Electronics’ status as the No. 2 foundry player can be challenged by Intel, which aims to reenter the global foundry market.
“To operate a foundry business, you need extreme ultraviolet or EUV machines, and the Netherlands’ ASML is the only one who can make them. The price of one EUV machine is 200 billion won ($168.2 million), so the barrier to entry is very high,“ Kim Yang-pang, a researcher at the Korea Institute for Industrial Economics and Trade, said.
”Also, the US is blocking Chinese companies from buying EUV machines for national security concerns, and Samsung Electronics is benefiting from the Sino-US rivalry. However, if a US company like Intel launches foundry business, ASML will have no choice but to split its EUV machine quota, and Samsung Electronics might struggle to secure sufficient supplies of EUV machines like it currently does.”
EUV machines are very sensitive and difficult to make. Of the 48 EUV machines ASML is producing this year, 37 of them are allocated for Samsung Electronics and TSMC. Next year, 51 units will be produced, and 40 of them are reserved for the two companies.
Ahn Ki-hyun, a senior executive at the Korea Semiconductor Industry Association, says that despite negative outlooks, Samsung Electronics’ foundry will grow no matter what, due to supply chain risks of clients.
“You can’t place all your orders with TSMC. To maintain supply chain risks, customers will have to diversify, and some of the orders will have to go to Samsung Electronics.”
By Kim Byung-wook
Published : November 25, 2021
By : The Korea Herald