SamsungPlans$115.8 Billion War Chest to Compete with TSMC for the World’s Largest Foundry(1)
There has long been rivalry between TSMC (Taiwan Semiconductor Manufacturing Company) and Samsung Electronics. To take over the lead in semiconductor industry, both companies have .
This year Samsung announced that the company would invest KRW 133 trillion in bolstering its competitiveness in terms of System LSI and Foundry businesses. TSMC likewise has been branching out to new business with its product lines covering most of products, while continuing to delve into similar chip fields.
The semiconductor value-chain mainly includes three important stages: design, manufacturing, and assembly, testing, and packaging (ATP), among which the technology behind the manufacturing process is the most sophisticated. At present, TSMC is definitely the biggest player when it comes to semiconductor manufacturing, with Samsung ranking second right behind it. Recently, Samsung has been making great efforts in the field of foundry, desiring to expand its scale of semiconductor business.
It was reported in the middle of June that Samsung has bagged Qualcomm Snapdragon 865 chip orders from TSMC and SD865 would be manufactured by Samsung. There was also rumor that NVIDIA would ditch TSMC in favor of Samsung to make its new generation GPU (graphic processing unit) as a result of Samsung’s intent on aggressive price undercutting.
According to recent market share, TSMC still controls half of the wafer foundry market. In the Global Top Ten IC Foundries Ranked for Q2 2019 released by Topology Research Institute, TSMC ranked first with revenues of USD 7.553 billion and a market share of 49.2%, while Samsung ranked second with USD 2.77 billion in revenue and 18% market share.
Nevertheless, Samsung has great ambition. On April 24, Samsung Electronics announced that the company would invest KRW 133 trillion (about USD 115.8 billion) in its logic chip business including foundry services by 2030. Samsung hopes to surpass TSMC, which is the industry leader in logic chip, and is looking forward to becoming the world's largest semiconductor foundry.
Facing the challenge from Samsung, an insider of TSMC told the journalist of Economics 21, “We will be fully prepared.”
Samsung’s semiconductor business has always been its major earning driver and cornerstone of technology. Ever since Samsung was founded, the South Korean government has been providing full support for its development, helping it to become one of the first-rate companies in the memory chips and CMOS image sensors businesses. With its particularly remarkable development in storage business, Samsung ranked first in the world in terms of operating profit in 2018.
However, the storage business has been declining continuously since last year, and the memory chip market is also going down at present. Micron, as Samsung’s peer, also reported a significant year-over-year decline in both revenue and profit in the third fiscal quarter of last year.
The analysis of the PC DRAM market from DRAMeXchange finds that most of DRAM contracts have been negotiated as monthly deals owing to an excess of supply over demand in Q1 2019. Besides, February also witnessed a slump in prices. The current quarterly decline has dropped from the originally projected 25% to nearly 30%, which led to the sharpest decline in a single season since 2011.
Faced with the uncertain market demand, ever-changing trade situation, and the ceiling on end markets, Samsung also hopes to increase its dominance of storage and semiconductor as well, so as to expand the company’s sources of revenue.
In 2005, Samsung Electronics made the strategic decision to enter the 12-inch logic foundry marketplace. But not until 2010 when the company won Apple’s orders did its annual revenue start to take a turn for the better, which was no more than $400 million from OEM before then.
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