One of the leading technology giants, Samsung Electronics Co. (Samsung) plans to invest $116 billion to manufacture its own semiconductors chips, which can enhance the performance of various components ranging from artificial intelligence to mobile battery. The company is looking for various clients by organizing the foundry forums and sealing negotiations with chip manufacturing companies across the globe.
The Company’s Most Expensive Investment
Many rival companies including Google, Apple Inc., and Amazon.com have secured their own chips manufacturing units. For instance, Google has the Tensor Processing Unit, Apple Inc. has the A13 Bionic, and Amazon.com Inc. has the Graviton2.
However, in terms of the foundry business, Samsung is behind these companies, and is set to execute its decade-long planning to acquire its own chips manufacturing facility by investing ₹8.26 lakh crore. This investment would be the most expensive investment for the company ever.
According to Bloomberg, “The South Korean company is investing heavily in the next step in miniaturizing semiconductors, a process called extreme ultraviolet lithography (EUV). It is a risky bid to move beyond its established business of cranking out commoditized silicon and to leapfrog the incumbent leaders in the ₹17.80 lakh crore foundry and logic-chip industry.”
Yoon Jong Shik, The Executive Vice President of Samsung’s foundry business stated, “A new market is opening up. Companies like Amazon, Google, and Alibaba, which lack experience in silicon design, are seeking to make chips with their own concept ideas in order to boost their services. I think this would bring a significant breakthrough for our non-memory chip business.”
According to TrendForce Corp., “Samsung is a relative underdog in this growing field. The foundry business as the manufacturing of chips for companies like Google and Qualcomm Inc. is known… is dominated by Taiwan Semiconductor Manufacturing Co. with more than half the market.”
Importance of Chips in Samsung Expansion
Samsung plans to invest about ₹71190.00 crores per year in research to develop equipment over the next decade. Moreover, the company is looking for major clients in Silicon Valley and is keeping an eye on China, as the country becomes a key source for supplying technologies for the construction of the EUV chips.
Samsung is set to manufacture Qualcomm’s 5G mobile chipset using the same EUV process, which would enable it to compete with its rival, Sony Corp. Bloomberg Intelligence analyst Anthea Lai commented, “I think Samsung’s CMOS image sensor business will continue to do well, riding on the industry boom.”
However, many analysts talked about the difficulties and high costs that would be involved in the manufacture of EUV chips. As ES Jung, Samsung’s President and General Manager for the foundry business, admitted, “The complexity of the lines drawn by the EUV equipment is similar to building a spaceship.”
CW Chung, head of pan-Asia technology at Nomura Financial Investment Co., claimed, “It is not just a matter of willingness. Chip-making is like a composite art. Unless there are enough supports for all-round social infrastructures, it’d be a scarcely achievable goal.”As analyzed by an investor, the success of Samsung’s investment for manufacturing logic chips depends upon how the company handles competition in the global market.
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