Investment, Know-how and Trust
Two years and two months have passed since Samsung Electronics announced its vision to rank first in system semiconductors by 2030. But critics say the Korean chipmaker will hardly clear the hurdle of TSMC, the No. 1 foundry company. While TSMC has increased its market share from 40 percent to 50 percent, Samsung Electronics has remained in the upper 10 percent range.
Industry experts say that Samsung Electronics should address three key issues of investment, know-how and trust. In other words, TSMC is far ahead of Samsung Electronics in all of these aspects. This is why Samsung Electronics' super-gap technology in memory semiconductors hardly works in the foundry sector.
TSMC’ annual investment is about triple that of Samsung’s in the foundry sector. Samsung’s investment in the semiconductor sector as a whole is larger than that of TSMC, but Samsung allocates a small part of its investment to the foundry sector. For Samsung, it has to narrow its gap with TSMC in the foundry sector while at the same time maintaining a super gap in the memory semiconductor market.
The gap in investment volume leads to a in know-how. TSMC started mass-producing 5-nm products this year. It is building a 3-nm facility in Taiwan with the goal of entering mass-production in 2022. It is also conducting research and development on a 2-nm process, which is regarded as the limit of the current semiconductor manufacturing technology, with the goal of mass-producing products in 2024.
Although Samsung Electronics also announced its success in mass-producing 5-nm products in 2021, industry analysts say that Samsung’s yield is too low to be seen as a success in volume production. In the foundry market, it is extremely important to supply products to customers such as Apple and Qualcomm on time. No companies are placing orders for 5-nm products with Samsung, as its mass-production capabilities have not been fully verified yet.
Samsung Foundry also has a more fundamental weakness in terms of earning trust with corporate customers. That is to say, Samsung has the System LSI Business Department in charge of designing and selling application processors (APs) for smartphones. It is natural for customers who have to hand over their semiconductor designs to foundry companies to prefer TSMC to Samsung Electronics. This is because TSMC engages in the foundry business only, so corporate customers do not need to worry about information leaks.
This is why rumors have been steadily going around that Samsung Electronics will separate its foundry business. However, if Samsung spins off its foundry business, it will not be able to make investment in the spun-off foundry company with money earned from its memory business. In other words, the spin-off idea can hardly be chosen until its foundry business secures a capacity to get on its feet.
Industry insiders are suggesting setting up a system semiconductor ecosystem as an alternative. This means Samsung helping Korean companies grow in various fields such as fabless, foundry, and back process (packaging). Samsung realized the merit of this approach two to three years ago and has since been strengthening cooperation with upstream and downstream companies.