Foundry Division's Performance Improving
Samsung Electronics’ foundry sales exceeded its NAND flash sales in the third quarter for the first time.
The company's foundry sales came in at US$5.584 billion in the third quarter, according to market research firm TrendForce and analysis reports from securities companies. The sales figure is US$1.284 billion (29.9 percent) higher than NAND flash sales (US$4.3 billion or about 5.62 trillion won). This is the first time that foundry sales have exceeded NAND flash sales at Samsung Electronics.
The company's foundry division fared well thanks to an increase in demand for customized chips related to artificial intelligence (AI) and 5G telecommunication. According to IC Insights, the size of the global foundry market this year is estimated at US$132.1 billion (about 172 trillion won), up about 20 percent from the previous year.
The number of customers also surged. Samsung Electronics has attracted fabless companies such as Qualcomm and Nvidia and companies that want customized chips such as Google and Tesla as customers. Other contributing factors were an improvement in the yields of its state-of-the-art processes and the increased competitiveness of its traditional processes.
On the other hand, Samsung's NAND flash business was directly hit by a decline in demand for PCs and smartphones. The NAND flash contract price fell 13.9 percent from US$4.81 at the end of last year to US$4.14 in November. This trend is expected to continue into the first half of 2023. NAND flash prices are projected to drop by more than 20 percent in the fourth quarter compared to the third quarter.
Samsung's competitiveness in foundry business still lags behind that of TSMC. The main problem is low yields, which not only lower profitability but cause customers to leave Samsung for TSMC. Although exact figures have not been disclosed, Samsung admits that the yields of its 5-nm and 4-nm foundry processes are lower than those of TSMC. However, high-ranking company officials recently emphasized that the yields of its cutting-edge processes have improved significantly. Market watchers say that Samsung appears to have made an improvement in the yields given the improving performance of the foundry division.
Securing competitiveness in packaging is also considered a major task that Samsung Electronics has to complete. Due to limitations in the miniaturization of semiconductors, the importance of packaging that efficiently arranges various chips to boost performances are on the uptick. In a reorganization move last week, the Korean chipmaker upgraded its unit in charge of advanced packaging from a task force (TF) to an independent team. In the past, Samsung Electronics mainly used packaging companies such as ASE in Taiwan and AMKOR in the United States. This change shows Samsung Electronics’ will to provide services differentiated from those of TSMC, analysts say.