Samsung’s Jay Y Lee
Some analysts question Samsung’s ability to carve out a significant share of a market dominated by TSMC, which spends some $ 17- billion annually to ensure it remains at the forefront of both technology and sheer capacity. For its part, Samsung’s semiconductor division plans to spend $ 26- billion on capital expenditure in 2020, but that’s been largely in support of its dominant memory business and not all of its expertise in making memory is directly relevant to creating advanced logic chips.
Processors are more complex to manufacture than memory and their production yields are harder to control and scale up in the same way. Foundry customers also require bespoke solutions, imposing another barrier to rapid expansion and also making Samsung dependent on customers’ designs. But the Korean giant can draw confidence from its work with Nvidia, whose CEO sung the praises of collaborating with Samsung on customising the manufacturing process for its latest graphics card silicon.
The risks and initial setup costs have whittled down the number of companies capable of even competing in the EUV- based chipmaking industry. Intel this year announced it’ll consider outsourcing production of its most important chips for the first time, highlighting the complexities of the business and leaving Samsung and TSMC as the two major competitors. While Samsung has scored some marquee customers, TSMC’s long- standing relationships with clients allow for better coordination on design and manufacturing, leading to superior yields, said Sanjeev Rana, an analyst at CLSA Securities Korea.
Mo st smar tphone , h i g h - performance computing and high- end server applications need leading- edge process fabrication for performance
“In terms of chip performance, Samsung and TSMC are neck and neck,” Rana said. “Most smartphone, high- performance computing and high- end server applications need leading- edge process fabrication for performance and power efficiency reasons. This is where the competition between TSMC and Samsung comes into the picture.”
The Korean company is making rapid advances, in part because even with TSMC’s deep pockets, the Taiwanese chip maker cannot expand capacity quickly enough to satisfy all demand. Customers also prefer to use more than one foundry, which also works to Samsung’s advantage. The Korean company has already secured enough orders from major clients to keep its currently most advanced 5nm process lines busy for the next few years, a company executive said. The electronics giant increased its roster of semiconductor clients by 30 percent last year, according to another official. In recent months, Nvidia and IBM are among those that turned to Samsung for some of their chip- making needs, while Qualcomm has reportedly awarded the company an $ 858- million contract to build its flagship mobile processors.
MASS PRODUCTION
Samsung started up its first dedicated plant for EUV- based fabrication in the southern city of
Hwaseong this year, while a second facility in Pyeongtaek is slated for mass production in the second half of 2021. The growth rate of its foundry business is expected to significantly exceed that of the market, which is likely to be in the high single digits, Shawn Han, senior vice president of the semiconductor business, said during a recent earnings call. The GAA technology that Samsung’s chosen is expected to be adopt by TSMC for 2nm processes in 2024, but there’s a chance that schedule could be moved up to the second half of 2023, said Kim Young- soo, an analyst at SK Securities.
“Technically, Samsung could turn the table in 2023 before TSMC kicks off the 2nm production,” Kim said. “There will be overflow orders of making application processor chips and edge computing devices. The key to expand the market share is how many EUV machines Samsung can secure.”
Officials at Samsung believe the company has a competitive edge from its experience building both the chips and the devices that they go into, like Galaxy smartphones. It can foresee and address the engineering requirements of its clients. Samsung believes its other trump card is an ability to package memory and logic chips into a single module, improving power and space efficiency. But some companies may be wary about outsourcing production to a direct competitor. TSMC executives have from time to time highlighted the fact that the Taiwanese chip maker doesn’t compete with any of its customers, a clear jab at Samsung. —