Narrowing Gaps
Samsung Electronics has dominated the global memory chip market for as long as 29 years. However, its market dominance is no longer guaranteed with competitors emerging. Besides, Samsung Electronics is failing to catch up with market leaders in the system-on-chip industry.
In the fourth quarter of 2020, Samsung Electronics’ global DRAM market share was 41 percent, followed by SK hynix (29.3 percent) and Micron Technology (24.3 percent). Unfortunately for Samsung Electronics, the gaps are narrowing.
Competition in the global semiconductor industry is continuing to heat up. The Chinese government prepared a fund of US$29 billion in 2019 to invest it in the semiconductor sector. Europe is aiming to account for 20 percent of the global chip production by 2030. They have the advantage that they can imitate Samsung Electronics. However, it is not that easy for the leader to make another quantum leap forward.
Samsung Electronics’ dominance in the global semiconductor industry can continue if it does well in the system-on-chip sector. However, this is not easy, either. Fabless companies as chip designers need to grow in step with foundry companies, but the fabless industry in South Korea is still insufficient in terms of original technology and professional manpower. “Foundry-based ecosystem establishment to cover fabless and packaging is urgent to catch up with TSMC,” said an industry source, adding, “South Korea’s system-on-chip industry can grow only after global leaders emerge in each of the segments.” Although South Korea is home to some post-processing companies such as Nepes and SFA, their annual sales stand at about 2 percent of those of ASE, the industry leader headquartered in Taiwan.
According to market research firm TrendForce, TSMC’s and Samsung Electronics’ Q1 foundry market shares are estimated at 56 percent and 18 percent, respectively. Samsung Electronics has never topped 20 percent in the global foundry market. Meanwhile, TSMC’s annual capital expenditure has been more than 300 percent of Samsung Electronics’ for years. This year, the Taiwanese company is planning to invest no less than US$28 billion to set up 3-nm production lines in Tainan and so on.
At present, the game changer in the industry is extreme ultraviolet (EUV) equipment. Ultra-small, low-power and high-performance chips can be manufactured with efficiency with the equipment and the quantity of such equipment in a semiconductor manufacturer indicates its technological, financial and production capabilities. This is why every global semiconductor manufacturer is trying to buy more EUV equipment.
At the end of last year, Samsung Electronics owned 25 pieces of EUV equipment and TSMC owned about 50. Each piece from the Netherlands requires a price and installation cost of more than 200 billion won. TSMC began to accelerate its ultra-microfabrication development in 2018 and has bought more than 60 percent of the total EUV equipment shipments, 75 pieces, since that year. The others have gone to Samsung Electronics, Intel, Micron Technology, SK hynix, etc.
This difference is likely to result in a permanent market share gap as insufficient equipment will lead to fewer orders from clients. In this regard, Samsung Electronics placed additional orders for about 20 pieces last year in order to respond to a rapid increase in chip demand related to the rapid growth of the AI and autonomous vehicle industries.
Samsung Electronics’ foundry business has an innate weakness that its System LSI Division in charge of smartphone AP design and marketing is a part of itself. Clients such as Qualcomm and Nvidia cannot but prefer TSMC out of concerns over tech leak.
Samsung Electronics is working on innovative technologies under its System-on-chip Vision 2030 announced in April 2019. The company is aiming to top the system-on-chip market in 2030 by investing 133 trillion won and become the world’s largest foundry at the same time. It is going to initiate mass production at 3 nm and below next year and the process will be based on the world’s first GAA technology for power efficiency enhancement. However, it is pointed out that Samsung Electronics is unlikely to be able to overtake TSMC.
In the smartphone AP market, the ranking of the System LSI division of Samsung Electronics, which develops and sells Exynos, has been between third and fifth. The high-end chip segment is being led by Qualcomm and MediaTek, another Taiwanese company, took 50 percent of the other segment last year.
In addition, Sony still remains robust in the image sensor market. Last year, Samsung Electronics’ share in the market stood at 19.8 percent whereas Sony’s amounted to 45.1 percent. Although Samsung Electronics is currently supplying an increasing number of clients with the world’s first 108 megapixel products and image sensors with a pixel size of 0.7 micrometer, Sony’s reputations and client portfolios still remain solid.