Samsung's Foundry Position Weakened

Nvidia has reportedly decided to partner with TSMC for the production of its next-generation GPUs.

Nvidia, the global No. 1 graphic processing unit (GPU) company, has reportedly decided to outsource the production of its next-generation GPUs to Taiwan’s TSMC.

Nvidia plans to build its H100 GPUs using TSMC's 4-nanometer manufacturing process. The new GPUs will be released from the third quarter of 2022. This product can process 40 terabits per second, or about 4,200 1.2 gigabyte movies. Nvidia’s other GPU RTX 4000 series will also be mass-produced using TSMC’s 5-nm process.

Accordingly, industry insiders expect TSMC to monopolize orders for all GPUs to be released by Nvidia in 2022. Nvidia had difficulties selling its GeForce RTX 3000 series in 2020 due to Samsung Electronics’ low production yields. Nvidia had outsourced the production of data center and consumer PC GPUs to TSMC until 2019. In 2020, it first selected Samsung Electronics as its manufacturing partner for RTX3000 series GPUs in an effort to lower production prices and boost product competitiveness by diversifying suppliers.

TSMC’s foundry market share is expected to expand further in the future. Nvidia has an 80 percent share of the global GPU market.

Experts say that losing a big foundry customer to TSMC is painful for Samsung Electronics. 

Furthermore, Samsung may also lose Qualcomm, another big foundry customer. It has landed an order to produce the Snapdragon 8 chipset for smartphones from Qualcomm. Yet, the company is reportedly having difficulties raising the production yield. Qualcomm has reportedly decided to partner with TSMC for production of a next-generation 3-nm AP currently under development. Qualcomm will release the 3-nm AP next year. In addition, Qualcomm is said to have outsourced part of the Snapdragon 8 Gen 1 production volume, which had been entirely outsourced to Samsung Electronics, to TSMC in the second half of 2021.

Kyung Gye-hyun, head of Samsung Electronics’ DS Business Division, said at the regular general shareholders’ meeting in mid-March that its production yield is stabilizing after an initial ramp-up, which took some time. He added that Samsung is actively collaborating with Qualcomm in the mid to long term.

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