Samsung Electronics has kicked off the revival of its semiconductor business by signing a contract with Apple. The Samsung Electronics System LSI division will design next-generation image sensors to be installed in Apple's new iPhone products, while the Samsung Electronics Foundry division will mass-produce these sensors for Apple. Analysts suggest that this marks a stepping stone for the system semiconductor business, which has suffered from quarterly deficits in the hundreds of billions won.
On the 7th, Apple officially announced that it will collaborate with Samsung at the semiconductor plant in Austin, Texas. It noted that it is developing an innovative new chip manufacturing technology that will be used for the first time globally, and by introducing it in the U.S. first, the facility will supply chips that optimize the energy efficiency and performance of Apple products, including the iPhone, shipped worldwide.
Apple remained tight-lipped about specific products and the scale of the contract, while Samsung Electronics also stated, "We cannot confirm specific details related to the contract with the client." However, industry insiders believe that the contracted product is the image sensor to be installed in Apple's new iPhone. Image sensors are system semiconductors that detect light and convert it into electrical signals.
◇ Apple image sensor previously exclusively supplied by Sony... Samsung Electronics enters the supply chain
Until now, Apple's image sensors were designed by Japan's Sony, mass-produced at TSMC's plant located in Japan, and supplied to Apple. Sony is the leading company with over 50% market share in the global image sensor market. However, it appears that Apple has begun diversifying its supply chain for cost reduction purposes. Samsung Electronics has been developing optimized technology to enter the Apple image sensor supply chain.
An industry insider stated, "The image sensors to be installed in Apple's iPhones will apply a hybrid bonding method that stacks three wafers with copper, without bumps connecting the chips. This is a technology aimed at enhancing the overall performance of the chips, including energy efficiency," and noted that currently, only Sony and Samsung Electronics have commercialized this technology.
Additionally, analyses suggest that this is part of a 'localization strategy' to maximize production in the U.S. as the threat of tariffs increases. At the announcement event, U.S. President Donald Trump stated, "I will impose a 100% tariff on semiconductors; if you promise to build a factory in America or are currently building one, there will be no tariffs."
The contract is also significant in terms of restoring the relationship between Samsung Electronics' Foundry division and Apple. The Samsung Foundry division has previously mass-produced application processors (AP), which serve as the brains of the iPhone. The AP is the first advanced product to apply cutting-edge foundry processes, requiring a high level of technological expertise and being a high-value product. However, tensions escalated when Apple filed a lawsuit in U.S. court in April 2011, claiming that Samsung smartphones infringed on the design and patents of the iPhone, leading Apple to switch its AP manufacturer to TSMC, which dealt a significant blow to the Foundry division.
◇ Following Tesla, Apple secures orders... A signal for recovering competitiveness in system semiconductors
Analysts suggest that this order signifies that Samsung's Foundry division has kicked off its revival. Samsung Electronics previously signed a contract for a 2nm (nanometer) cutting-edge process with Tesla, with the contract scale being about 23 trillion won, the largest single contract in the history of Samsung Electronics' Foundry division. This has provided an opportunity to prove technological capabilities by securing clients in the advanced processes below 3nm, where they have struggled with orders.
As a result of this order, it seems that both the System LSI division and the Foundry division of Samsung Electronics will have a platform to reduce their deficits by securing orders for image sensors from Apple. The System semiconductor division of Samsung Electronics has recorded deficits in the trillions of won, hindering Samsung's semiconductor performance. It is expected that a significant operating loss of the late 2 trillion won range was recorded in the second quarter of this year in Samsung Electronics' System LSI and Foundry divisions. The System LSI has faced deteriorating profitability due to difficulties in supplying its AP, 'Exynos,' and stagnation in market share for image sensors, while the Foundry division has been continuously losing due to yield issues and poor order reception.
A semiconductor industry insider remarked, "The very fact that we have secured orders for products from Tesla and Apple, known for their stringent quality tests, is a very encouraging achievement," adding, "Given that the system semiconductor business, which has been seen as a 'painful finger', has proven its competitiveness, this is expected to be an opportunity for securing additional orders."