Samsung Electronics' foundry (semiconductor contract manufacturing) division has secured Tesla as a customer for advanced processes below 3nm (nanometers or one billionth of a meter) and is making every effort to win orders from global big tech corporations like Qualcomm. Analyzing that Samsung Electronics has proven its advanced process technology with this contract, it appears to be accelerating efforts to secure additional mass-production orders from big tech companies like Qualcomm's next-generation application processors (AP) and NVIDIA.
According to the industry on the 29th, Samsung Electronics' foundry division is focusing on winning orders for Qualcomm's AP, NVIDIA's graphics processing units (GPU), and Broadcom's artificial intelligence (AI) chips. With stabilization of yield and product performance enough to secure bulk orders for Tesla's AI chips, it seems that the foundry is quickening its efforts for additional orders. In particular, it is reported to be focusing on securing AP volumes from Qualcomm, a long-time customer, much like Tesla.
Kim Hyung-jun, head of the next-generation intelligent semiconductor division, stated, "The fact that a large-scale mass production contract has been signed indicates that Samsung's foundry test yield has exceeded 60%." He explained, "With this contract, corporations like Qualcomm, Broadcom, and NVIDIA, which have been highly dependent on TSMC, will also seek cooperation with Samsung's foundry."
◇ "Samsung foundry wins over Tesla with cost-effectiveness and service mindset"
It has been evaluated that the strategy that effectively reversed Tesla's shift to TSMC after the 7nm process was the 'cost-effectiveness' and 'service mindset.' It is reported that Samsung Electronics set process prices more than 20% cheaper than TSMC. Unlike TSMC, which secured major corporations like Apple, Qualcomm, and NVIDIA as clients, Samsung Electronics' foundry division, struggling with a lack of orders, desperately needed external customer 'references.' For this reason, it is understood that they persuaded Tesla by offering prices at the manufacturing cost level.
The Samsung foundry seems to have adopted this strategy with the aim of securing additional volumes from Tesla. Even if it does not record short-term operating profits, it intends to use this order as a stepping stone for additional contracts. Elon Musk, CEO of Tesla, also said on his X (formerly Twitter), "$16.5 billion is the minimum amount, and the actual figure will be several times more." The scale of this contract, as disclosed by Samsung Electronics, amounts to 22.7647 trillion won, and once mass production fully commences, it is analyzed that a minimum annual revenue of 3 trillion won will be secured.
During this contract negotiation, it is reported that the Samsung foundry significantly accommodated Tesla's demanding requirements. Samsung Electronics, which has been accustomed to developing products a generation ahead of competitors in the memory semiconductor business strategy and quickly responding to customer demands in the foundry market, has been criticized for lacking a 'service mindset.' However, in negotiations with Tesla, they recognized that Tesla was struggling with TSMC's limited production capacity and accepted conditions set by Tesla, including the production costs of prototypes, mass production costs from manufacturing to packaging, and production facilities.
Yoo Hwa-jun, a professor in the Department of Electrical and Computer Engineering at KAIST, noted, "TSMC is focused on producing for Apple, Qualcomm, and NVIDIA, which means that both production lines and personnel available to meet Tesla's demands are limited," adding, "Samsung Electronics likely approached negotiations with a lower profile, presenting relatively lower prices."
◇ "2nm process technology proven... accelerating additional orders from Qualcomm and others"
With this contract, Samsung Electronics aims to accelerate the acquisition of additional customers, including Qualcomm. It is reported that Samsung Electronics is in discussions for securing Qualcomm's next-generation AP in the 2nm process. Qualcomm, which had been a customer of Samsung Electronics, shifted all production volumes to TSMC after the 4nm process. However, it has been analyzed that Qualcomm feels burdened by the costs of advanced processes and exclusive production at TSMC, which could present an opportunity for Samsung's foundry.
Samsung Electronics has also been identified as seeking to secure production volumes of existing models being mass-produced through TSMC's 3nm process, in addition to Qualcomm's next-generation AP. Qualcomm aims for diversification of manufacturers, and it is targeted that utilizing Samsung foundry can help reduce manufacturing costs. Furthermore, Samsung Electronics is reported to be speeding up cooperation with NVIDIA and Broadcom, which are emerging as strong players in the application-specific integrated circuit (ASIC) market.
An industry insider stated, "Corporations like Qualcomm and Broadcom also bear the risk of having to align mass production schedules and product costs with TSMC's timeline if they rely solely on TSMC for production." He added, "If Samsung's foundry enhances its technology with this contract, it will create opportunities for securing additional volumes."