We're number two, so nobody's number one!

VietNamNet•12/06/2023

Last year, memory chip prices plummeted and are projected to continue falling by another 23% in the current quarter. For the first time in 14 years, Samsung's profits in the first three months of the year fell to their lowest level since 2009.

Confronted by pressure from changing macroeconomic factors, the giant was forced to reduce production, a move contrary to its earlier statement that it would maintain production expansion until the market recovered. Meanwhile, competitors in the same industry, such as Micron, announced they would lay off 15% of their workforce.

Samsung is building a $17 billion chip foundry in Texas, USA.

But it was precisely during the most challenging period for the chip market that the South Korean company found a glimmer of growth in another corner of the semiconductor industry. They doubled their foundry business to produce custom chips for major clients such as Qualcomm, Tesla, Intel, and Sony, not to mention thousands of smaller brands.

Samsung is building a $17 billion chip foundry in Texas, where it expects to produce the first batch of advanced chips in the US next year. At home, the company also announced plans to spend $228 billion on a five-chip foundry complex expected to be operational by 2042.

The South Korean giant is one of the world's three largest advanced chip manufacturers, ranking only behind Taiwan's TSMC and ahead of America's Intel.

“We don’t want to be second,” affirmed Jon Taylor, Vice President of Factory Engineering at Samsung. “As a business, we are never satisfied with being behind others.”

The South Korean company announced an ambitious new roadmap last October, aiming to produce 2-nanometer (nm) chips by 2025 and 1.4 nm chips by 2027.

“If they can achieve those timelines, they (Samsung) will officially surpass TSMC,” said Dylan Patel, an expert at research and consulting firm SemiAnalysis. “However, TSMC is the only brand that the entire industry trusts to meet its stated goals.”

Circumstances create heroes.

Last year, Samsung's stock fell nearly 30%, but has rebounded by 28% this year. This is partly due to the escalating semiconductor war between the US and China.

The US-China semiconductor war, showing no signs of cooling down, presents an opportunity for South Korea's largest chaebol.

In May, Beijing banned domestic companies from using products from the American chipmaker Micron, leading to a surge in South Korean company shares. Meanwhile, the US agreed to grant the South Korean giant a one-year exemption to operate two chip foundries in mainland China, amid pressure from many other semiconductor companies to halt the export of chip technology to China.

Over the past three decades, the U.S. market share in global chip manufacturing has plummeted from 37% to just 12%. This is largely due to estimated construction and operating costs in the U.S. being at least 20% higher than in Asia, where labor is cheaper, supply chains are more accessible, and there are more government incentives.

"The Chip Act is helping to bridge the gap in construction costs between Asia and the United States," said Jon Taylor.

Semiconductor manufacturing costs would also be lower in the U.S. if more companies participated in the expanding domestic supply chain. Intel is building large new factories in Arizona, Ohio, and Europe. Meanwhile, TSMC is spending $40 billion on chip manufacturing plants in the U.S.

Currently, 90% of advanced chips are manufactured in Taiwan. Meanwhile, Samsung says it is increasing production at its Taylor, Texas facility due to rising domestic demand in the US market.

"Including Taylor in the plan will not only increase domestic chip manufacturing capacity but also help the U.S. become less dependent on potentially insecure geographical locations," said the company's U.S. leader.

Of the $17 billion Samsung invested in its Texas factory, $11 billion was allocated to machinery and equipment, with Applied Materials being the primary supplier – the company that recently announced the construction of a $4 billion semiconductor manufacturing facility in Silicon Valley.

(According to CNBC)

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