Samsung Electronics is solidifying its foundation for a revival of its semiconductor business. Recently, Chairman Lee Jae-yong returned after visiting big tech companies in San Francisco and Silicon Valley for two weeks and made a significant remark stating that he 'prepared for next year's business.' As Samsung Electronics' semiconductor division faces difficulties ranging from memory to foundry (contract semiconductor manufacturing), it is analyzed that the chairman directly engaged to strengthen the customer base for a complete revival.
The mention of next year's business by Chairman Lee is interpreted as a step to validate the outcomes prepared by Samsung Electronics' semiconductor division since the first half of this year and to prepare for mass supply starting next year. In fact, Samsung Electronics, which has shown sluggishness in areas such as general-purpose memory, high-bandwidth memory (HBM), and foundry for the past 1-2 years, has recently focused all its business efforts on next year and is gradually completing next-generation technologies.
◇ Redesigned and verified next-generation DRAM project… 'Faster speed compared to competitors'
According to industry sources on the 19th, Samsung Electronics is achieving target yields earlier than planned in the development stage of its next-generation DRAM product, the 10-nanometer 6th generation (1c) DRAM, and is preparing for the mass production of initial quantities. Samsung Electronics initially predicted that it would start mass production at the same time as SK hynix or about 1–2 months ahead, but it is now projected that the ramp-up phase could be 3 to 6 months ahead of SK hynix, given the current pace.
The importance of 1c DRAM lies in its incorporation into the next-generation HBM, HBM4 (6th generation HBM), making it a crucial material for the success of the HBM market. A source familiar with Samsung Electronics noted that 'Hwang Sang-jun, head of the DRAM development division, who has the full trust of Vice Chairman Jeon Young-hyun, has been taking a cautious approach, akin to 'knocking on a stone bridge' multiple times' and added, 'To avoid the mistakes made with 1a and 1b DRAM, there have been numerous redesigns and verifications undertaken early on, and they are now delivering significant results internally.'
The HBM3E (5th generation HBM) 12-layer product, for which Samsung Electronics had repeatedly faced setbacks, is now showing signs of supply to its largest industry customer, NVIDIA. Global securities firms such as Morgan Stanley and Hong Kong's GF Securities are leaning towards the rumor of Samsung Electronics passing the 'August test' for HBM3E. Since HBM4 will be completed through Samsung Electronics' foundry division processes, it is a significant turning point that allows the memory and foundry divisions to create synergy.
An industry source remarked, 'The investment frenzy in generative artificial intelligence (AI) is creating immediate responses and demand for advanced server memory technologies,' adding that if Samsung Electronics successfully mass-produces cutting-edge DRAM based on 1c technology, it can demonstrate a difference in production capacity, or 'size,' compared to SK hynix and Micron, monopolizing greater profits.
◇ Will foundry transform into a cash cow?
The foundry division, which has been pointed out as a cause of Samsung Electronics' poor semiconductor performance with quarterly deficits in trillions of won, is recently shooting signs of a rebound. Before Chairman Lee's departure, Samsung Electronics announced a foundry contract worth 22.7648 trillion won with Tesla, and during his business trip to the U.S., news of an order from Apple was also revealed. Although Apple did not disclose the specific type of chip, the industry estimates it to be for the next-generation iPhone's image sensor (CIS).
The semiconductor tariff policy of President Trump has ultimately benefit Samsung Electronics, which has factories in the U.S. While TSMC has been hurriedly constructing factories in places like Arizona, Samsung Electronics has already been operating its foundry plant in Texas for over a decade. Recently, the Taylor factory is also about to commence operations. Given the long-standing cooperation with local corporations, it has created strengths in winning contracts for automotive chips and other sensor products.
In 2014, when Samsung Electronics secured the Qualcomm Snapdragon 14-nanometer mobile application (AP) products ahead of TSMC, it was evaluated as a successful outcome of its localization strategy. At that time, Samsung Electronics expanded its insufficient production capacity and secured production stability by entering into a production license agreement with the U.S. foundry company GlobalFoundries (GF), through extraordinary steps, leading to its contract with Qualcomm.
Many semiconductor companies from not only Taiwan and Japan but also Europe have relied on either in-house production or outsourced to TSMC for production. However, following the establishment of Trump's second administration, the likelihood of finding partners for chip production in the U.S. is high. In Japan and Europe, there are companies designing chips for various fields, including sensors, automotive, home appliances, and security. Samsung's foundry, which has focused on securing large customers and cutting-edge processes, is rumored to recently be changing its strategy to build a diverse portfolio through mature processes for a solid performance base.