Leading AP Production

Samsung Electronics' microprocessor business is likely to grow this year, helped by the increased production of semiconductor chipsets using the latest production process. As the price war in the mobile application processor (AP) market is expected, the Korean tech giant has already secured large AP makers as customers.

According to industry sources on Feb. 2, as price competitiveness is emerging as an issue in the mobile AP market this year, Samsung's competitiveness in the production process of 14 nm FinFETs is in the spotlight. APs are chips that play an important role in operating smartphones. They are core components for smartphones, similar to an engine in the car. 

Dominant players in the AP market like Qualcomm and Apple enter into a contract with Samsung or Taiwan Semiconductor Manufacturing Company to manufacture their own APs. The Korean firm is getting a lot of attention in the consignment production area since its production process is superior to its rival companies. Chipsets manufactured by Samsung using the production process of 14 nm FinFETs are smaller than existing products, and consume less power. Hence, they are suitable for premium mobile devices. 

Park Yu-ak, an analyst at Meritz Securities, said, “Global AP makers are likely to focus on lowering the cost of production this year in order to offset a decline in AP prices.” He added, “Samsung's system semiconductor business is going to mass produce and supply chips to Apple, Qualcomm, and Nvidia starting in the second quarter of this year. As a result, the Korean tech giant is projected to exhibit stellar performance.” Market research firm Strategy Analytics estimated that Qualcomm accounted for 40 percent of the global AP market in terms of total shipments, and 50 percent in terms of sales as of last year. Apple constituted 16.0 percent of the market in 2014. 

A Samsung associate said, “The production process of 20 nm FinFETs is a mainstream technology in the market. Rival companies are trying to complete the manufacturing process of 16 nm FinFETs, but our company has already introduced the production process of 14 nm FinFETs.” The official added, “As the number is smaller, the manufacturing process is more detailed and sophisticated.” 

Samsung's semiconductor business turned over 10.66 trillion won (US$9.690 billion) last year, of which 2.7 trillion won (US$2.5 billion) was operating profits in the final quarter of last year. The results for the fourth quarter achieved by the semiconductor business are equivalent to the performance results of the memory and system semiconductor units combined. 

“The system semiconductor business will increase its investment in production facilities this year,” said Lee Myung-jin, senior vice president and head of investor relations at Samsung, at a conference call, following its announcement of results for Q4 2014 at the end of January. Lee added, “We have already secured enough customers to the extent that we can meet consignment productions for the 14 nm FinFET line in the second half of this year.”