10 years investment of 116 billion US dollars! Samsung wants to grab chip dominance

Technology giants are increasingly designing semiconductor chips independently to optimize AI functions, improve server performance, and extend battery life. Google has a Tensor Processing Unit (TPU), Apple has an A13 bionic chip, and Amazon has Graviton 2. However, these giants lack processes that can help produce new chips. To help them, Samsung Electronics plans to invest $ 116 billion over the next decade to boost the chip manufacturing business.

Samsung is investing heavily in the next generation of semiconductor miniaturization, also known as extreme ultraviolet lithography (EUV) technology. This is the most expensive manufacturing business upgrade Samsung has tried so far, and it is also a risky attempt to make itself no longer confined to the existing semiconductor production business, nor is it content to serve as a leader in the foundry and logic chip industry Even if the size of this industry has reached 250 billion US dollars.

Yin Yongzhi, executive vice president of Samsung’s foundry business, said at a forum in Seoul recently: “A new market is on the rise. Companies like Amazon, Google and Alibaba who lack experience in silicon design are looking to use their own conceptual ideas Manufacturing chips to improve their service levels. I think this will bring a major breakthrough to our non-storage chip business. “

In this growing area, Samsung is relatively disadvantaged. According to market research firm Trend Force, chip foundry business, such as manufacturing chips for Google and Qualcomm, is always dominated by TSMC, which has a market share of more than half, while Samsung’s market share is only 18%.

TSMC also took over the foundry business of Apple’s A-series processors from Samsung, even though Samsung was Apple’s original production partner. Samsung plans to invest more than $ 10 billion annually in equipment research and development in the next ten years, but TSMC has greater ambitions, with capital expenditures of about $ 14 billion this year and next.

CW Chung, head of the Pan-Asian Technology Division at Nomura Financial Investment Corporation, said of Samsung ’s chances of success: “It’s not just a matter of will. Chip manufacturing is like a synthetic art. Unless there is full support for infrastructure, it will It is a difficult goal. “

In order to win the favor of customers, Samsung executives are holding roving lectures, holding foundry forums and negotiating deals in big cities such as San Jose, Munich and Shanghai.

Es Jung, president and general manager of Samsung’s foundry business, accompanied South Korean presidents Moon Jae-in and Lee Jae-hyun earlier this year when he unveiled the $ 17 billion EUV plant, saying: “The complexity of drawing lines with EUV equipment is similar to building a spacecraft “The plant is scheduled to begin mass production in February 2020.

ASML Holding NV’s EUV machines sell for $ 172 million, and Samsung is installing dozens of EUV machines in Hwaseong in an effort to gain a leading position in this technology. Both TSMC and Samsung are expected to implement EUV’s 5nm production process in the new year, which means that they will become increasingly competitive in this expanding market.

A research report released by Citigroup shows that once TSMC and Samsung accelerate and achieve economies of scale, the upgrade time of the entire process cycle may be reduced by 20%, and the foundry capacity output will increase by 25%.

Greg Roh, senior vice president of Hyundai Motor Securities, said: “As we enter the 5G era, TSMC is extremely busy, and new product orders are flocking. For Samsung, this is also a good Opportunity to increase customer market share by offering lower prices and shorter delivery schedules to meet customer needs. “

According to Samsung executives who have direct knowledge of the matter, Samsung is working with major customers to design and manufacture custom chips, and this work has begun to increase its revenue. Silicon Valley and China’s push for custom processors is opening up new opportunities. Samsung has already established a partnership for this, and the recent announcement that it will produce AI chips for Baidu early next year is proof of this.

Samsung executives believe that the company has a competitive advantage because it has extensive experience in manufacturing chips and devices. As a result, Samsung is able to anticipate and address the engineering requirements faced by its customers. Samsung believes that its other trump card is the ability to package memory and logic chips into a single module, thereby increasing power and space efficiency.

However, analysts have warned that some companies are wary of outsourcing production to their direct competitors in the consumer electronics market, fearing that Samsung will learn and replicate their chip designs in their own products. Analysts said, “In the final analysis, the success of Samsung’s logic chip business depends on its market positioning. In terms of foundry, Samsung needs to dispel customer doubts and stop them from seeing them as potential competitors in the logic chip business.”

Samsung is in contact with rivals in smartphone manufacturing and has agreed to sell 5G Exynos chips to vivo. At the same time, the company will use the same EUV process to make Qualcomm’s 5G mobile chipset.

On the other hand, Samsung is competing with foundry customer Sony in the growing image sensor market, and this year released an unprecedented 108 million pixel smartphone camera. “I think Samsung’s CMOS image sensor business will continue to perform well,” said Anthea Lai, an analyst at Bloomberg Think Tank.

If Samsung can make technological progress, it should find that its diversified semiconductor products will not lack customers. Although China is increasingly seeking various technical support from domestic suppliers, the higher efficiency of EUV chips may be the key to helping Samsung solicit business from China.

Trend Force analysts point out: “Increased demand for internal chips by major companies is good news for the growth of the foundry industry.

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