Samsung Electronics will face more difficulties in achieving its goal of becoming No. 1 in system semiconductors by 2030 with the solidification of a partnership between Chinese telecommunication equipment maker Huawei and Taiwanese foundry leader TSMC, industry watchers say.
Huawei's affiliate and fabless maker HiSilicone accounts for the largest share of orders placed on TSMC's micro-fabrication processes, according to the DigiTimes of Taiwan on Nov. 2. Currently, only Samsung Electronics and TSMC have introduced micro-fabrication processes under 7 nanometers (nm) among global foundry companies. HiSilicon places orders on TSMC only. TSMC's sub-7-nm process lines are already fully scheduled with orders. Some analysts say that TSMC gives priority to HiSilicon orders.
TSMC is also employing a more aggressive strategy thanks to a strong ally, Huawei. TSMC plans to ramp up its investment this year to US$15 billion, a 50 percent increase from its plan announced at the beginning of this year. It is also eager to introduce EUV exposure equipment worth about 200 billion won per unit. Chinese companies’ contribution to TSMC’s sales in the third quarter of this year stood at 20 percent, up 5 percentage points from a year earlier. This means TSMC’s dependence on Huawei is growing.
Lee Jae-yong, vice chairman of Samsung Electronics, was confident about taking first place in the system semiconductor sector by 2030 when he disclosed his vision at the company's Hwaseong factory in Korea in April. Since then, Samsung Electronics has been making aggressive moves to attain its goal. It put forward its investment plan for neural network processors (NPUs), which are also known as “the brain of artificial intelligence,” and announced an extreme ultraviolet (EUV)-based foundry technology roadmap.
The problem is that competitors are not happy about Samsung's move to take control of the memory semiconductor and system semiconductor markets. Samsung Electronics mass-produced 7-nano chips based on an EUV process for the first time in April this year, but its share in the global foundry market fell from 19.1 percent in the first quarter to 18 percent in the second quarter.
Huawei is rapidly expanding its presence in the mobile AP market with the introduction of its Kirin 990, an AP with a 5G communication chip and its own NPU in September. Huawei's APs are designed by HiSilicon. The Kirin 990 is the world's first 5G mobile AP to be mass-produced via TSMC's 7-nm EUV process, Huawei said. Once a rumor had it that British semiconductor design firm ARM would join U.S. trade sanctions on China and stop supplying semiconductor design IP assets to Huawei. Yet Huawei says its cooperation with ARM is progressing without problems. However, Huawei is also concentrating on developing APs through its own technology.
Samsung Electronics unveiled the Exynos 990, which are loaded with dual NPUs and mass-produced through its own 7-nano EUV process, last month to expand its share of the high-performance mobile AP market, but experts say that its technology gap with Huawei is not wide. Huawei's Kirin 990 also adopted a dual NPU and, like the Exynos 990, has a CPU based on the Cortex-A76, an ARM's semiconductor design IP asset. It is not Apple or Qualcomm but HiSilicon that accounts for the biggest share of orders placed on TSMC in the fourth quarter of this year. Some analysts forecast that this situation will hold until the first quarter of next year. This is bad news to Samsung, which is eyeing synergies between its foundry and AP technologies.
Seven in 10 smartphones produced by Huawei are loaded with APs designed by HiSilicon, so Huawei's global AP market share is likely to grow this year. According to SA, a market research firm, Huawei ranked fifth in the mobile AP market with a 10 percent share last year after Qualcomm (37 percent), MediaTek (23 percent), Apple (14 percent) and Samsung Electronics (12 percent). Huawei came in second with a 17 percent share in the global smartphone market after Samsung Electronics (21 percent) in the first quarter of this year. From January to September of this year, its total smartphone sales also increased 26 percent on year to 185 million units. Its sales volume declined in Europe due to U.S. sanctions, but overall sales increased thanks to support for Huawei smartphones in the Chinese market.
TSMC is preparing a more aggressive growth roadmap on the back of its alliance with Huawei. TSMC is seeking to widen its gap with Samsung in the foundry business. It swept EUV exposure equipment exclusively produced by ASML of the Netherlands this year, and is planning to build a 3-nm process plant at Science Park in the south of Taiwan at the end of this year. In addition to Huawei, TSMC has secured customers such as Apple, AMD, and Qualcomm. In the third quarter of this year, TSMC recorded operating profit of US$3,459 million, a year-on-year increase of more than 13 percent. According to TrendForce, a market research firm, TSMC's global foundry market share in the third quarter of this year arrived at 50.5 percent, an increase of 1.3 percentage points from the previous quarter, resulting in a wider gap with Samsung Electronics (18.5 percent).