The operating rate of the legacy (mature) production line, which had hindered Samsung Electronics' foundry (semiconductor contract manufacturing), has shown signs of recovery. With the mass production of additional orders received from the legacy process, which was cited as the cause of the large deficit in Samsung Electronics' foundry division, it is expected that the annual deficit will decrease.
According to the industry on the 1st, the operating rate of the production lines P2 and P3 at Samsung's Pyeongtaek campus, which was below 50% last year, has reportedly reached its highest level recently. These production lines are responsible for legacy processes including 4nm (nanometer, one billionth of a meter), 5nm, and 7nm. The legacy production line at Samsung Electronics' Giheung campus is also said to be rapidly recovering as the mass production volume for the 8nm process increases.
Samsung Electronics' legacy production line was pointed out as a key factor in the large deficit during the first half of the year. During a conference call to announce the results for the second quarter on the 31st, Samsung Electronics noted, "The continued decline in the operating rate of the mature process line led to poor performance." The mature process refers to the legacy process that has already been mass-produced for a long time, with stabilized yield and performance. Recently, it has been classified from the 4nm process as a legacy process. Samsung Electronics' foundry division is believed to have recorded an operating loss in the trillion-won range in the second quarter.
It is analyzed that the profitability of products produced for Baidu, a major customer of Samsung Electronics' 4nm process, was impacted due to the effects of U.S. sanctions. Samsung Electronics was mass-producing Baidu's artificial intelligence (AI) chips using the 4nm process. In the earnings announcement conference call, Samsung Electronics stated, "A provision was generated due to the impact of the public sanctions on AI chips."
However, it has been reported that in June this year, the mass production volume for the legacy production line has been continuously injected, reaching its maximum capacity. It is analyzed that the operating rate gradually improved due to the mass production of the 'base die' materials for the sixth-generation high-bandwidth memory (HBM4) developed by Samsung Electronics' memory division, as well as cryptocurrency miners for Chinese customers, Google's mobile application processors (AP), and previous-generation APs from the system LSI division.
The legacy production line at Samsung Electronics' Giheung campus is also understood to be increasing its operating rate. In particular, it is known that mass production orders from domestic and foreign clients have begun in the 8nm process. A semiconductor industry official noted, "Samsung Electronics has advanced its processes to enhance the performance margin of legacy processes that it deemed competitive compared to TSMC, in addition to advanced processes under 3nm. It is particularly understood that the injection of mass production volumes in the 4nm, 5nm, and 8nm processes has been increasing."
As the operating rate of the legacy process, which had been holding back the performance of Samsung Electronics' semiconductor division (DS), rises, there are analyses that the deficit could shrink in the second half of the year. Seo Seung-yeon, an analyst at DB Financial Investment, stated, "In the second quarter, the slower-than-expected improvement in foundry operating rates and provisions for inventory due to public AI semiconductor sanctions have led to an increase in operating losses compared to the previous quarter. However, from the second half of the year, improved foundry operating rates are expected to lead to an increase in quarterly operating profits across the company."
Park Soon-cheol, Samsung Electronics' Chief Financial Officer (CFO), also explained during the conference call, "As the IT market improves, we expect Samsung Electronics' performance to rebound in the second half, starting from the second quarter as a low point, showing a pattern of 'lower first half and higher second half.'" A representative from Samsung Electronics stated, "We cannot provide specific figures regarding the current operating status of the foundry division."