By Baek Byung-yeul
Samsung Electronics is facing growing competition with its rivals in the foundry business, as TSMC and Intel are expanding their investments in the rapidly growing, contracted semiconductor producing sector.
TSMC recently revealed that it plans to invest between $40 billion and $44 billion this year alone, a move to solidify its leadership position in the foundry business. Industry analysts predicted Tuesday that this major investment will far exceed Samsung's annual investments in its chip business, including in the memory chip sector, a fact that will consequently become a major obstacle to the Korean company's plan to rank first in the sector by 2030.
TSMC is not Samsung's only threat. U.S.-based chip giant Intel, which announced its reentry into the foundry business in 2021, is making every effort to build foundry plants on its home soil. Intel is currently building two foundry lines in Arizona, with a total of $20 billion invested.
Furthermore, Intel reportedly plans to build a "Mega Fab" in Ohio, combining large-scale chip production lines and research facilities. The initial investment is estimated at $20 billion and the total investment is expected to reach $100 billion.
To counter these strong investment drives by its rivals, Samsung is also beefing up its investments, focusing especially on making the smallest chip possible via ultra-fine processes, but experts estimate that it will be difficult for the Korean giant to narrow the gap with TSMC in a short period of time.
The foundry business refers to contract-based chip manufacturing for client companies. Though Samsung is the No. 1 player in the memory chip business, the company also aims to secure a dominant position in the non-memory business, which is around one-and-a-half times bigger than the memory chip sector, and is less affected by industry cycles.
Lee Seung-woo, an analyst at Eugene Investment and Securities, said that Samsung's memory chip business is expected to see positive demand this year, but the challenge it is faced with is that "TSMC is mercilessly increasing investment in its foundry business."
"Last year, Samsung is estimated to have invested a total of around 40 trillion won ($33.55 billion) in semiconductors, including memory, foundry and construction investment. Whereas, TSMC is planning to invest more than 50 trillion won in its foundry business alone this year. Considering that huge investments are needed, it seems difficult to chase TSMC in the foundry field with the current business structure," Lee said.
According to data by market tracker TrendForce, the global foundry market has seen explosive growth, as the quarterly total foundry revenue rose by 11.8 percent quarter-on-quarter to $27.28 billion in the third quarter of 2021.
The improved figure stems from robust demand for chip-featured products. TSMC took the largest share globally, of 53.1 percent, in the third quarter, followed by Samsung with 17.1 percent and UMC of Taiwan with 7.3 percent.
Despite the fact that the company lags behind TSMC in terms of its market share in the foundry business, Samsung is also increasing its strength in the industry by adding plants in Texas, U.S. as well as locally in Pyeongtaek, Gyeonggi Province. The company is also striving to make smaller chips faster than its competitors by utilizing the latest technology.
Smaller chips not only improve productivity but also function better ― one reason why companies are competing to reduce chip size.
Utilizing ultra-fine chip fabrication processes, chip makers improve yield per wafer, for higher productivity and lower prices. Also, smaller chips consume less power and process data at higher speeds.
According to its foundry roadmap, Samsung plans to begin the mass production of 3-nanometer chips in the first half of 2022. This timeline is months earlier than TSMC, which announced it will mass-produce 3-nanometer chips from the second half of this year.
As part of its efforts, Samsung introduced a new processor for smartphones called Exynos 2200, on Jan. 17. The new processor is forecast to come equipped in Samsung's upcoming, top-tier smartphone, the Galaxy S22, which will be launched in February.
Samsung said that the Exynos 2200 chip is built on its most advanced, 4-nanometer, extreme ultraviolet lithography process and boasts improved graphic performance thanks to cooperation with U.S.-based chip company AMD.
The chip was scheduled to be unveiled through an open event last week, but Samsung abruptly delayed the event, raising doubts that the company might have failed to meet a quality target due to a low yield rate.
However, a Samsung official denied such speculation, saying, "The event was delayed because we plan to unveil the new processor at the time of the launching of the new smartphone." The official added, "I would like to note that, if we haven't been confident in the production yield, we wouldn't have been able to publicly announce a new product."