'Samsung set to win over TSMC in the end' - The Korea Times
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'Samsung set to win over TSMC in the end'

Samsung Electronics Vice Chairman Lee Jae-yong, second from left, and the company's device solutions business unit chief Kim Ki-nam, third from left, take a tour of the Dutch chip equipment maker ASML's plant in Eindhoven, Oct. 13. / Courtesy of Samsung Electronics
Samsung Electronics Vice Chairman Lee Jae-yong, second from left, and the company's device solutions business unit chief Kim Ki-nam, third from left, take a tour of the Dutch chip equipment maker ASML's plant in Eindhoven, Oct. 13. / Courtesy of Samsung Electronics

By Baek Byung-yeul

Samsung Electronics is intensively investing in the expansion of its foundry business in efforts to catch up to Taiwanese semiconductor company TSMC, which continues to dominate the contract-based chip-making business.

With an aim to generate a new source of profit from the business, the Korean tech giant clarified last year that it would become a leader in the foundry business by 2030, edging out the Taiwanese company.

Jim Handy, a U.S.-based analyst working for Objective Analysis, said Samsung's ambitious goal seems quite distant at this moment, but the conglomerate will be able to achieve the goal even considering the enormous amount of time and money investments required.

Calling Samsung Electronics a "slow-moving steamroller," the analyst said Samsung will be able to push forward to achieve its goal in the same way the company has done for years in other business areas.

"Back in the 1990s, some Samsung executives explained how the company manages itself. It works very well. They put together a plan and then communicate that plan to all of the employees at every level. The employees all then work together to make it happen. Later I noticed that Samsung always tries to become No. 1 in any market it decides to enter," Handy told The Korea Times.

"Between the two of these I started to call the company a 'slow-moving steamroller.' I would explain that with a steamroller everyone knows exactly where it is going and their only option is to get out of the way. The steamroller is now aimed at TSMC's market. I believe that Samsung can take market share away from TSMC, but it will be very difficult, and it will require enormous investments," he added.

Currently, Samsung holds the second-largest market share in the foundry business, but remains a ways behind TSMC. In the third quarter, Samsung is forecasted to hold a 17.4 percent share in the global foundry market while leader TSMC is expected to hold a dominant 53.9 percent share, according to market researcher TrendForce.

While TSMC has shown dominance in the sector, Samsung is also increasingly securing chip-manufacturing orders from global chip design companies such as Intel, Qualcomm and Nvidia. Among the latest chip manufacturing orders, Samsung reportedly started volume production of Qualcomm's latest application processor Snapdragon 875, using extreme ultraviolet (EUV) lithography equipment at its plant in Hwaseong, Gyeonggi Province.
The analyst agreed that it will be difficult for Samsung to catch up to TSMC in a short period of time. "TSMC is an extraordinarily well-run company. The leading-edge processes are so profitable that the company can compete with anyone at producing older processes and still make enough money to invest in tomorrow's technology," he said.

However, Handy added Samsung has a comparative advantage with respect to funding through its other business divisions, such as smartphones and memory chips. "Samsung's advantage is that it is a conglomerate. The company's foundry business can invest using profits from other divisions. This means that Samsung can have higher capital expenditures than TSMC. I expect for Samsung to use this to take market share from TSMC," he noted.

"I can't tell you how soon this will happen. The timing will be determined by how much money Samsung spends on this effort. Even if it misses its goal, the steamroller will continue to move ahead. It will just arrive at its goal a little later than planned."

Samsung Electronics' semiconductor plant in Hwaseong, Gyeonggi Province / Courtesy of Samsung Electronics
Samsung Electronics' semiconductor plant in Hwaseong, Gyeonggi Province / Courtesy of Samsung Electronics

To take the upper hand over TSMC, Samsung knows it is essential to strengthen the cooperative relationship with Dutch photolithography equipment maker ASML, the only supplier for the EUV technology-based lithography equipment, which is vital for fabricating chips at the 7-nanometer node level and below.

Even though ASML's EUV equipment costs $35 million or more per system, securing its equipment is essential to produce smaller and more power-efficient chips.

Indicating the two have established a firm cooperative relationship, Samsung said its Vice Chairman Lee Jae-yong met with top management at ASML including CEO Peter Wennink and CTO Martin van den Brink at their head office in Eindhoven, Oct. 13, on the sidelines of his week-long trip to Europe.

Samsung said the meeting covered various issues of mutual interest, such as ASML's plans to sell EUV equipment and the specifics of the two-way partnership's development of next-generation memory chips. Upon his arrival in Seoul, the vice chairman specifically said that he "explored ways to develop relations regarding EUV."


Baek Byung-yeul baekby@koreatimes.co.kr


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