Samsung Electronics' foundry division has begun "allocation" in some processes to distribute production volumes by customer, according to industry sources. With demand surging on the back of an expanding artificial intelligence (AI) semiconductor market and rising orders from global big tech, the company appears to be pursuing a "selection and concentration" strategy by taking new customer orders only on a limited basis.
According to the industry on the 2nd, Samsung Electronics' foundry division has recently been adjusting supply priorities by allocating volumes to existing customers first and selectively taking orders from new customers. Similar shifts in supply and demand are being detected among major domestic design service providers (DSPs) that make up the Samsung foundry ecosystem.
A source in the design house industry said, "Starting this year, allocation has been introduced for Samsung foundry processes," and noted, "Rather than unconditionally accepting every customer order, the mood is to select and concentrate on solid projects."
◇ Tight supply in some processes as AI Semiconductor demand expands
The industry says the explosive growth of the AI market is fundamentally reshaping foundry demand. Demand for advanced processes, once centered on smartphone application processors (APs), has recently shifted to AI accelerators, application-specific integrated circuits (ASICs), and high-performance computing (HPC) chips, leading to a flood of orders from global big tech corporations.
In fact, Samsung Foundry is producing Tesla's Autonomous Driving chips and AI inference chips for AI startup Groq, and is expanding collaborations with global AI corporations such as Nvidia and Google. The industry assesses that this big tech demand is tightening supply and demand in some processes.
In particular, Samsung Foundry's 4-nanometer (nm) process is reportedly almost sold out through next year, and some 8-nanometer processes are said to be running at virtually full capacity.
Accordingly, some analysts say the order strategy is being reoriented toward large customer projects with high line operation efficiency to maximize the production efficiency of fabs whose utilization rates are nearing their limits.
From a foundry operations perspective, there is also an assessment that, compared with mass-producing many different product types, focusing on a few large projects in a "few models, large volumes" approach is more advantageous for fab efficiency and profitability.
Another industry source explained, "From the factory's standpoint, concentrating on producing several large projects is far more efficient operationally than mass-producing many kinds of products."
◇ Windfall from TSMC's supply shortage… absorbing demand for supply chain diversification
The industry believes that the shortage of advanced process supply at Taiwan's TSMC, the world's No. 1 foundry, and the resulting demand from big tech for supply chain diversification (multi-foundry) have contributed to higher utilization at Samsung Foundry.
It is said that customers who left Samsung for TSMC in the past due to issues such as Production yield are now reviewing Samsung Foundry again or adopting it as a second source (alternative supplier) to spread supply chain risk and strengthen bargaining power on chip unit prices.
Buoyed by this expanding demand, there is also an assessment that Samsung's market position has strengthened to the point that it can raise supply prices for some processes by about 15% to 20%.
The market sees this as a sign of recovery for Samsung Electronics' foundry division, which has suffered prolonged sluggishness and losses. Brokerages, citing expanding AI Semiconductor demand, higher utilization rates, and large customer wins, forecast that the foundry division could turn a profit in the second half of this year or next year.
However, since the higher utilization is concentrated in certain nodes, some say further observation is needed to determine whether this will lead to improved profitability for the entire division, given the burden of large depreciation expenses.