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Exclusive: Samsung Electronics says it is not interested in spinning off foundry business

Daniel Nenni

Admin
Staff member
Samsung Galaxy innovation space on the Champs-Elysees avenue in Paris

The Samsung logo is pictured during the inauguration of the Samsung Galaxy innovation space on the Champs-Elysees avenue in Paris, France, April 29, 2024. REUTERS/Benoit Tessier/File Photo

  • - Analysts say contract and logic chip businesses incur billions in annual losses
  • - Chairperson Lee says wants to grow the businesses
  • - Lee also cites challenges in building new Texas chip factory
MANILA/SEOUL, Oct 7 (Reuters) - Samsung Electronics is not interested in spinning off its contract chip manufacturing business as well as its logic chip designing operation, Chairperson Jay Y. Lee told Reuters on Monday.

Analysts say Samsung's businesses of designing and manufacturing chips for other clients are incurring billions of dollars of annual losses due to weak demand and have been dragging down the overall performance of the South Korean company, which is the world's largest memory chipmaker.

Samsung has been expanding into logic chip designing and contract chip manufacturing to lower its reliance on bread-and-butter memory chips. Logic chips are used to process data.

Lee announced his vision in 2019 to overtake Taiwan's TSMC as the world's largest contract chipmaker by 2030.

The company has since announced billions of dollars of investments in contract chip manufacturing, building new plants in South Korea and the United States.

However, several sources familiar with the matter have told Reuters that Samsung has struggled to win big orders from customers to fill up the new capacity.

Asked if Samsung was considering carving out the chip manufacturing business called foundry or its System LSI logic chip designing business, Lee told Reuters: "We are hungry to grow the business. Not interested in spinning (them) off."

Lee was speaking during a visit to the Philippines where he accompanied South Korean President Yoon Suk Yeol to a summit with President Ferdinand Marcos Jr.

TAYLOR CHIP FACTORY PROJECT IS 'TOUGH'

Lee acknowledged that Samsung was facing challenges on the new chip factory it is building in Taylor, Texas saying: "That's a little bit tough because of (a) changing situation, election".

He did not elaborate and Samsung Electronics did not comment further.

South Korea has been a major foreign investor in the United States in recent years, lured by Washington's financial support for sectors such as green energy and chips, but some companies including EV battery maker LG Energy Solution have turned cautious this year due to potential policy changes after the U.S. presidential election in November.

Samsung pushed back in April the production schedule for the project to 2026 from its earlier plan of late 2024 and said operations would be managed in a phased manner depending on customer demand.

The move underscores challenges it faces in its efforts to overtake bigger rival TSMC, which counts Apple (AAPL.O), opens new tab and Nvidia (NVDA.O), opens new tab as major customers.

Last year, Samsung posted an operating loss of 3.18 trillion won ($2.4 billion) from the foundry and System LSI businesses, according to average estimates of nine analysts reviewed by Reuters.

It does not provide a performance breakdown of the two businesses.

Analysts estimate that the two operations would report another loss of 2.08 trillion won this year.

In 2017, Samsung Electronics separated its chip manufacturing from the design business but foundry customers remain concerned that Samsung might share their technology secrets with its design unit, analysts say.

"In principle, it is better off for Samsung to split its foundry business to gain trust from customers and focus on the business," said Lee Jong-hwan, a former Samsung engineer and a professor in System Semiconductor Engineering at SangMyung University.

However, he said it would be harder for the foundry unit to survive as a standalone business as it could lose access to financial support from the memory chip business.

 
Ever since Samsung lost Liang Mong Song and his team to SMIC their logic processes have had crap yield.
 
The report claims:

"Samsung has been expanding into logic chip designing and contract chip manufacturing to lower its reliance on bread-and-butter memory chips."

Is that actually true over the past 2-3 years ? It's obviously what they'd like to happen, but ... . I haven't checked the numbers, but got the distinct impression that the external foundry business is likely losing absolute sales as well as market share. And is internal logic usage (like Exynos) growing or shrinking ?
 
I do know that Samsung is back to using QCOM SoCs and that means N3 and N2. This may be a sign of the times and an end to the IDM business model at leading edge (logic).
 
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