Samsung seeks new chip business
• Group plans aggressive expansion to triple market share using new manufacturing technology to win contracts
Samsung Electronics planned to triple the market share of its contract chip manufacturing business within the next five years by aggressively adding clients, a senior company executive said on Monday, as it targets new growth drivers for the unit.
Samsung Electronics planned to triple the market share of its contract chip-manufacturing business within the next five years by aggressively adding clients, a senior company executive said, as it targets new growth drivers for the unit.
The estimated 5.3-trillion won ($4.76bn) business at Samsung was split off as a separate arm within its semiconductor division in May, in a clear statement that the company was preparing to focus on the business and narrow the big market share gap with leader TSMC.
Executive vice-president ES Jung, the head of Samsung’s new foundry division, said on Monday the firm wanted a 25% market share within five years and would seek to attract smaller customers in addition to big-name clients to fuel the growth.
“We want to become a strong number two player,” Jung said.
Samsung is on track for record profits and is expected to pass Intel as the top chip maker by sales in 2017 on a memory market boom.
But in contract manufacturing the firm lags well behind Taiwan’s TSMC, which held 50.6% of the market in 2016 compared with Samsung’s 7.9%, according to research firm IHS. It trailed US-based Global Foundries, which had a 9.6% share, and Taiwan-based UMC’s 8.1%.
The memory industry is notoriously cyclical and unlikely to repeat this year’s huge revenue gains. And as new applications such as cloud computing, autonomous driving and virtual reality emerge, analysts say Samsung needs to strengthen the rest of its chip portfolio to secure future growth.
Jung declined to comment on revenue or investment targets, but said the foundry and memory businesses would share the 6-trillion won next-generation chip production line to be built in Hwaseong, South Korea.
Samsung does not reveal its chip contract manufacturing revenue, but analysts estimated it at 5.3-trillion won in 2016. Daishin Securities forecast it would rise 10% or more in 2017.
While TSMC splurges $10bn of capital expenditure annually, Jung said Samsung would be able to keep production capacity flexible depending on market demand by relying on memory chip lines. Though Samsung already counts major firms such as Qualcomm, Nvidia and NXP Semiconductors as clients, it is a long way behind TSMC.
Analysts estimate Samsung lost Apple to TSMC in 2015 and the Taiwan firm had 100% of Apple’s mobile processor business in 2016 and 2017.
“You need a technology that can wow your clients. Without such advanced technology, it’ll be difficult to win back customers from your rivals,” Jung said, without specifying any clients’ names.
Samsung was confident of producing chips using the latest manufacturing technology — extreme ultraviolet (EUV) lithography — ahead of rivals.
EUV is a next-generation technology that potentially lowers the cost and complexity of chip manufacturing. Samsung and TSMC are neck and neck in introducing the process.
Samsung says it will start making chips with circuitry widths of 7 nanometres by using EUV in the second half of 2018.
TSMC said earlier in July that its chip manufacturing process using EUV would be the “most advanced technology in foundry industry” in 2018 in terms of density, performance and power.