Samsung Foundry Surpasses TSMC in 2nm Production

Samsung Electronics' foundry division, which is involved in semiconductor contract manufacturing, had significantly lagged behind Taiwan...

Samsung Electronics' foundry division, which is involved in semiconductor contract manufacturing, had significantly lagged behind Taiwan's TSMC but has now achieved technological competitiveness and is making progress. Samsung initially faced low yields when adopting its advanced 3nm (1 nanometer equals one-billionth of a meter) process, but has recently achieved stability with its 2nm technology after the 3nm process and is working to reduce the gap with TSMC. Industry analysts expect Samsung Foundry to become profitable from 2027, when the operational efficiency of the Taylor Fab (factory) in Texas, U.S., which will start operations next year, improves, and it will then begin a comprehensive effort to challenge TSMC.

◇ Increasing 2nm Production

A market research company, Counterpoint Research, forecasted on the 20th that Samsung Electronics' 2nm manufacturing capability would rise from 8,000 wafers per month in 2024 to 21,000 wafers by the end of next year, representing a 163% growth. As the yield of Samsung's 2nm process becomes more stable, the company is increasing its output. "As Samsung gains additional clients in mobile devices, supercomputers, and AI, the progress in its 2nm technology is expected to mark a significant milestone," said Counterpoint Research. "If yield improvements continue and mass production at the Taylor Fab in the U.S. proceeds without issues, Samsung is anticipated to significantly reduce the competitive gap with TSMC in advanced chip manufacturing for the first time in several years."

Samsung's 2nm manufacturing process yield is believed to have increased to between 55% and 60%. With higher yields, the company has been attracting significant clients for its advanced semiconductor processes. In July, it entered into an agreement with Tesla to manufacture next-generation AI6 chips valued at $16.5 billion (about 24.28 trillion South Korean won). Furthermore, Samsung has obtained orders for its System LSI division's in-house smartphone application processor, the Exynos 2600, as well as Apple's image sensors and mining-specific integrated circuits (ASICs) from Chinese firms MicroBT and Canaan. There are also hopes that Samsung might secure an order for Qualcomm's application processor.

◇ Adaptive Pricing Model Draws in Shoppers

As per the data from market research company TrendForce, TSMC maintained a leading 70.2% position in the foundry sector during the second quarter, with Samsung Electronics holding 7.3%. The difference in market share, which had reduced to 30 percentage points in 2019, has kept increasing.

Nevertheless, the technology sector thinks Samsung has the potential to rival TSMC in the 2nm manufacturing process. Samsung launched the new GAA (Gate-All-Around) process at 3nm, a technology that reduces current leakage and greatly enhances performance and power efficiency when compared to the traditional FinFET design. Samsung implemented GAA starting at 3nm, whereas TSMC plans to introduce it at 2nm. "Samsung acquired extensive experience with GAA while addressing challenges in the 3nm process," mentioned an industry expert. "This positions Samsung differently from TSMC, which is just starting to implement the new process."

At present, TSMC is experiencing a high volume of orders from major clients such as NVIDIA and Apple. As a result, it has reportedly raised the cost of its 2nm wafers by 50% in comparison to earlier generations. This situation may provide an advantage to Samsung. Unlike TSMC, Samsung is drawing in customers through a more adaptable pricing approach. Moreover, as Samsung concentrates on securing production capacity across different processes, its foundry sales are beginning to show improvement. Recently, Samsung has obtained production contracts with U.S. AI semiconductor startups Charbite (4nm), Anaphae (28nm), and South Korean startup DeepX (2nm). "TSMC is having difficulty accepting new orders as it focuses on handling large volumes for big tech companies like NVIDIA and Apple, and has also increased wafer prices," said a source within the semiconductor industry. "This is creating an opportunity that Samsung can take advantage of."

◇ Aiming for Profitability

The technology sector anticipates that Samsung Foundry, which has experienced quarterly losses in the tens of billions of won over multiple years, will achieve profitability beginning in 2027. This expectation stems from higher production efficiency at the Austin Fab and the commencement of mass production of Tesla's AI6 chips at the Taylor Fab in 2027.

We reached record orders focused on advanced technologies, including major clients for 2nm," the company stated in its third-quarter financial report. "In addition to full-scale mass production of new products using the 2nm technology, we anticipate further performance improvements through ongoing operational efficiency upgrades and cost-saving efforts.