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Samsung Electronics Co. is investing $ 116 billion in its next-generation chip business that includes manufacturing silicon for external customers, betting that it will finally be able to close the gap with industry-leading Taiwan Semiconductor Manufacturing Co. as soon as within two years.
South Korea’s largest company will mass-produce 3-nanometer chips in 2022, a senior executive from its foundry division told attendees at an invitation-only event last month. That previously unreported target means it is on track to start producing the industry’s most advanced semiconductors in the same year that its Taiwanese rival hopes to surpass that milestone. Samsung is already developing initial design tools with key partners, Park Jae-hong, executive vice president of foundry design platform development, told conference delegates.
If Samsung succeeds, it will go a long way toward its ambition to become the chipmaker of choice for companies like Apple Inc. and Advanced Micro Devices Inc., which now rely on foundries like TSMC. The business is not new to Samsung, which was Apple’s first A-series iPhone processor maker, but the company’s renewed momentum is now led by billionaire heir Jay Y. Lee, who wants to see him establish technology leadership. in advanced sectors such as chip manufacturing and 5G networks to drive their next phase of growth. Park’s comments suggest that Samsung is accelerating its bid to compete with iPhone chip maker TSMC, one of the biggest beneficiaries of this year’s wave of demand for personal electronic devices.
“To actively respond to market trends and lower the design barrier to competitive systems-on-chip development, we will continue to innovate our portfolio of cutting-edge processes, while strengthening Samsung’s foundry ecosystem through close collaboration with partners.” Samsung’s Park told attendees: according to people present at the event.
Samsung’s goal is in line with TSMC’s goal of offering volume production of 3nm chips in the second half of 2022. But the Korean company also hopes to improve by adopting what is known as the Gate-All technique. Around, considered by some as a game. -Changing technology that can more accurately control current flows through channels, reduce chip areas and reduce power consumption. TSMC had opted for the more established FinFET structure for its 3 nm lines.
“Samsung is catching up with TSMC very quickly and is looking to dominate its competitor by embracing the new technology for the first time,” said Rino Choi, professor of materials science and engineering at Inha University. “However, if Samsung cannot improve the production performances of the forward node quickly at an early stage, it may lose money.”
Already the world’s largest maker of computer memory and displays, Samsung wants a larger share of the $ 250 billion die and logic chip industry that is poised for accelerated growth with the advent of artificial intelligence and fifth generation wireless technology. In 2019, TSMC controlled more than half of the contract chip manufacturing market, while Samsung had just 18 percent, according to data from TrendForce.
Lee has been very interested in the matter. He flew to ASML Holding NV’s headquarters in the Netherlands last month to discuss the supply of its extreme ultraviolet (EUV) lithography machines, equipment that is indispensable for creating the most advanced semiconductors. Other top executives have toured major cities from San José to Munich to Shanghai, organizing foundry forums and negotiating deals.
Some analysts question Samsung’s ability to seize a significant share of a market dominated by TSMC, which spends about $ 17 billion annually to ensure that it remains at the forefront in both technology and capacity. For its part, Samsung’s semiconductor division plans to spend $ 26 billion on capital expenditures in 2020, but that has largely been to support its dominant memory business and not all of its memory manufacturing expertise is directly relevant. for creating advanced logic chips.
Processors are more complex to manufacture than memory, and their throughputs are more difficult to control and scale in the same way. Foundry customers also require tailored solutions, which imposes another barrier to rapid expansion and also makes Samsung dependent on customer designs. But the Korean giant can draw confidence from its work with Nvidia Corp., whose CEO praised the collaboration with Samsung in customizing the manufacturing process for its latest silicon graphics card.
Initial setup costs and risks have reduced the number of companies able to compete even in the EUV-based chip manufacturing industry. Intel Corp. announced this year that it will consider outsourcing the production of its most important chips for the first time, highlighting the complexities of the business and leaving Samsung and TSMC as the two main competitors. While Samsung has garnered some outstanding clients, TSMC’s long-standing relationships with clients allow for better coordination in design and manufacturing, leading to superior returns, said Sanjeev Rana, an analyst at CLSA Securities Korea.
“In terms of chip performance, Samsung and TSMC are shoulder to shoulder,” said Rana. “Most high-end server applications, high-performance computing, and smartphones require state-of-the-art process manufacturing for performance and energy efficiency reasons. This is where the competition between TSMC and Samsung comes in. “
The Korean company is making rapid strides, in part because even with TSMC’s deep pockets, the Taiwanese chipmaker cannot expand capacity fast enough to meet all the demand. Customers also prefer to use more than one foundry, which also benefits Samsung. The Korean company has already gotten enough orders from major customers to keep its more advanced 5nm process lines busy for years to come, a company executive told Bloomberg News. The electronics giant increased its list of semiconductor clients by 30 percent last year, according to another official. In recent months, Nvidia and IBM Corp. are among those who turned to Samsung for some of their chip manufacturing needs, while Qualcomm Inc. reportedly awarded the company a 1 trillion won contract. ($ 858 million) to build its flagship mobile processors.
Samsung launched its first plant dedicated to EUV-based manufacturing in the southern city of Hwaseong this year, while a second plant in Pyeongtaek is scheduled for mass production in the second half of 2021. The rate of Its foundry business growth will significantly outpace that of the market, which will likely be in the single digits, said Shawn Han, senior vice president of the semiconductor business, during a recent earnings call. TSMC is expected to adopt the GAA technology that Samsung chose for 2nm processes in 2024, but there is a possibility that the schedule will move to the second half of 2023, said Kim Young-soo, an analyst at SK Securities.
“Technically, Samsung could change course in 2023 before TSMC starts 2nm production,” Kim said. “There will be overflow orders for the manufacturing of cutting-edge computing devices and application processor chips. The key to expanding market share is how many EUV machines can Samsung insure. “
Samsung officials believe the company has a competitive advantage thanks to its experience building both the chips and the devices they use, such as Galaxy smartphones. You can anticipate and address the engineering requirements of your customers. Samsung believes its other trump card is the ability to package memory and logic chips in a single module, improving energy and space efficiency. But some companies may be wary of outsourcing production to a direct competitor. TSMC executives have from time to time highlighted the fact that the Taiwanese chipmaker does not compete with any of its customers, a clear blow to Samsung. Bloomberg News
