Samsung Electronics' foundry (semiconductor contract manufacturing) division has confirmed that it received an order for semiconductor capacity to be integrated into Tesla's artificial intelligence (AI) supercomputers. Samsung Electronics plans to mass-produce this through its 2nm process at the Taylor fab in Texas, USA. With this contract, evaluations have emerged indicating that the advanced process technology of Samsung Electronics' foundry division has entered a normal trajectory after struggling with yield stabilization and facing order sluggishness.
Elon Musk, Tesla's Chief Executive Officer (CEO), noted, "Samsung is expected to focus on the production of Tesla's next-generation AI chips at the new Texas plant," adding that "the strategic importance of the Texas fab cannot be overstated." He also mentioned, "Samsung has decided to help Tesla maximize manufacturing efficiency," and "plans to visit the site directly to speed up progress. The factory is located in a convenient place not far from my home."
◇ A much-needed break for Samsung foundry, struggling below 3nm
On the 28th, Samsung Electronics disclosed that it has secured a foundry contract worth 22.7647 trillion won. The contract period is from 24th of this month to December 31, 2033. Samsung Electronics did not specify the client company in its announcement. However, with Musk directly revealing the details of the plan, the mass production of the 2nm process at the Taylor fab in the United States has been officially confirmed. The chips being mass-produced this time are expected to be used not only in Tesla vehicles but also in the humanoid robot "Optimus."
Samsung Electronics' foundry division has been suffering from significant sluggishness in advanced processes below 3nm. Samsung Electronics has made bold moves to take the lead in the 3nm process, such as preemptively introducing the gate-all-around (GAA) process, but it struggled with yield stabilization and performance enhancement, widening the gap with TSMC. According to the market research firm TrendForce, in the first quarter of this year, Samsung Electronics' foundry market share was 7.7%, while TSMC held a dominant 67.6%.
As Samsung Electronics faced a crisis, TSMC monopolized production volumes of advanced processes from global tech giants like Apple, Qualcomm, NVIDIA, and AMD, further widening the gap with Samsung Electronics. While the foundry division of Samsung Electronics struggled with billions of won in losses, TSMC reported a second-quarter net profit of $98.27 billion (approximately 18.8 trillion won), a 60% increase from the same period last year.
◇ Samsung foundry, which has been striving at 2nm… "Raising technology to a level comparable to TSMC"
However, evaluations have emerged that Samsung Electronics' 2nm process technology has reached a level comparable to TSMC with this order contract. To make up for its shortcomings in the 3nm process, Samsung Electronics has committed itself to the 2nm process. The company has shifted its business strategy, delaying the development of 1nm process and focusing on the 2nm process. Reports suggest that Samsung Electronics' current test yield for the 2nm process has surpassed 60%.
An industry insider noted, "The fact that a global tech giant has signed a mass production contract worth 22 trillion won means that the process technology and yield satisfied the client company," adding that "the mass production quality tests for electric vehicle companies are more stringent compared to other industries, which signifies that the foundry division of Samsung Electronics has entered a normal trajectory in its process technology."
Samsung Electronics is expected to accelerate its efforts to narrow the technology gap with TSMC. Despite losing face in the 3nm process, the timing for the mass production and large-scale contract of the 2nm process is similar to that of TSMC. Samsung Electronics plans to mass-produce its next-generation application processor (AP), "Exynos 2600", through the 2nm process in the second half of the year. It is reported that TSMC has also recently begun mass production of Apple's AP.
The Taylor fab in Texas, USA, which had been under concerns about its normal operation due to sluggish orders, seems to be relieved as well. Samsung Electronics is investing a total of $18 billion (approximately 24 trillion won) to build a foundry plant in Taylor, Texas. To compete with TSMC, Samsung Electronics has been establishing advanced foundry production lines but has faced difficulties in securing local tech giants' orders, leading to projections that facility investments and mass production line operation schedules may be delayed compared to expectations.
An industry insider indicated, "It is true that there were concerns about the operation of the Taylor fab after the substantial investments made," adding that, "With this order contract serving as a turning point, the floodgates for securing advanced process orders have opened, so mass production at the Taylor fab is expected to proceed as scheduled."