“Concerns are overblown”: Samsung Electronics refutes fears surrounding foundry business

Posted on : 2022-04-29 17:16 KST Modified on : 2022-04-29 17:16 KST
The company had a record first quarter this year, according to a recent earnings presentation
Samsung Electronics’ office building in Seocho District, Seoul (Yonhap News)
Samsung Electronics’ office building in Seocho District, Seoul (Yonhap News)

“We think the recent market concerns are overblown.”

Samsung Electronics is actively refuting rumors suggesting the company is running into trouble when it comes to production yields in its foundry division.

“Contrary to concerns about the semiconductor foundry [field], demand from major customers remains solid,” Kang Moon-soo, senior vice president at Samsung Electronics and head of its foundry market and strategy team, said during a first-quarter earnings presentation on Thursday. “The order backlog for the next five years is eight times larger than last year’s [foundry] sales,” Kang underscored.

It is not typical for Samsung Electronics to mention specific figures related to the size of contract chipmaking orders. The move to make such information public is interpreted as the company’s intention to dispel concerns about the yield of its 4-nanometer (nm, 1 billionth of a meter) chips and the loss of major customers.

Previously, there were industry rumors that Samsung Electronics’ foundry’s 4-nm process yield was delayed, causing Nvidia and other large customers to give their business to Taiwanese foundry TSMC for consignment production of next-generation products.

Kang also expressed confidence in the future market outlook and yield improvement. “Demand from foundry customers is stronger than the company’s [production] capacity, so a supply shortage is expected to continue,” he said.

Regarding chip production, Kang says the 5-nm process has reached the advanced stage of production yield while the production figures of 4-nm chips are expected to start improving soon. “The expansion of production in the initial stage of the 4-nm process was somewhat delayed, but we are currently entering the expected yield improvement curve by focusing on stabilization,” Kang said.

The company’s numbers show that its foundry division saw its best first quarter ever this year, with sales up by 35% compared to the previous year due to the improvement of the yield in the front-end process.

Kang also noted that, by improving the node development system of the 3-nm process, Samsung now has a verification process for each stage of development. This will help with reducing the yield ramp-up period, improve profitability, and ensure a more stable supply, according to Kang.

“Based on solid partnerships with major customers, we will improve our customer portfolio and business structure by securing customers not only in mobile, but also in high-performance computing and network fields,” Kang added.

Yesterday, Samsung Electronics announced that its revenue increased to 77.7 trillion won in the first quarter of this year, an all-time quarterly record, resulting in an operating profit of 14.12 trillion won.

Compared to the same period last year, sales were up by 18.95% and operating profit by 50.5%. By business sector, the semiconductor division recorded sales of 26.87 trillion won and an operating profit of 8.45 trillion won.

Samsung’s device experience (DX) division, launched at the end of last year by merging the company’s mobile and home appliances divisions, recorded 48.7 trillion won in sales and 4.56 trillion won in operating profit.

Meanwhile, Bloomberg reported on Wednesday (local time) that Samsung Electronics recently hired Bank of America semiconductor mergers and acquisitions expert Marco Chisari for a senior position. It is predicted that large-scale mergers and acquisitions by Samsung Electronics, which were virtually halted after the 2016 acquisition of Harman, an American electronics and audio company, will resume.

By Sun Dam-eun, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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