Wary of Overinvestment in Foundry
Bloomberg and the Wall Street Journal (WSJ) have recently reported that Samsung Electronics will expand its latest foundry plant in the United States by investing more than US$10 billion.
Samsung Electronics' official response is that nothing has been decided regarding the investment. The chipmaker neither acknowledged nor denied the reports, taking a vague attitude. Analysts say that Samsung Electronics is caught in a dilemma as it has to take into account the need to hold TSMC in check, uncertainties over Intel's foundry orders, and disputes between the United States and China.
TSMC’s plan to enter the United States has created the dilemma for Samsung Electronics. TSMC announced in 2020 that it will invest US$12 billion to build a foundry in Arizona, the United States. The plant is slated for completion in 2024.
Samsung Electronics is running a foundry in Austin, Texas. It started mass-production in 1998 and currently churn out mainly 14-nm products. Although the plant has no problem in producing general-purpose products, it has its limits in winning orders for the latest semiconductors.
The U.S. government is offering “carrots” to chipmakers to induce investment. The WSJ reported that the U.S. central government is moving to raise billions of dollars to set up a fund to provide subsidies to companies that produce semiconductors on the U.S. mainland.
There are also many risk factors that Samsung has to take into consideration. Industry watchers say that Intel may outsource less-than-expected amount of production to Samsung Electronics. Intel has decided to outsource GPU production to TSMC, while farming out production of main board chipsets, named “the Southbridge,” to Samsung Electronics. The production volume is about 15,000 sheets of wafer per month, which amounts to only 16 percent of Austin plant's production capacity. On top of that, Intel declared that it will produce most CPUs on its own.
Samsung Electronics should also take into account the fact that it started to ramp up domestic investment in earnest in 2020. It began to invest 10 trillion won last year to build foundry lines with EUV lithography equipment at Pyeongtaek Plant 2 in Gyeonggi Province. In October 2020, ground was broken for Pyeongtaek Plant 3, which will cost about 30 trillion won. Samsung Electronics needs to avoid excessive investment.
Samsung Electronics also has a painful experience. In December 2012, the chipmaker announced that it would invest US$3.9 billion to expand its Austin foundry plant. But it suffered a big setback as Apple, a major customer at the time, gave orders to TSMC.