New customers, stronger yields, TSMC constraints lift profit hopes
A green traffic light is seen near Samsung Electronics headquarters in Suwon, Gyeonggi Province. (Im Se-jun/The Korea Herald)
Samsung Electronics’ long-struggling foundry business is showing signs of a rebound, as improving yields, rising utilization and a string of high-profile AI chip projects raise prospects for a possible return to profit as early as the third quarter.
The momentum is being driven by Samsung’s push to turn its combined strengths in logic, memory and packaging into an edge in custom artificial intelligence chips, with tight capacity at TSMC giving global tech customers more reason to diversify suppliers.
Big tech orders
Earlier this week, Samsung Electronics co-CEO and chip chief Jun Young-hyun met with Nvidia CEO Jensen Huang in Seoul to reinforce foundry cooperation, underscoring how the Korean chipmaker has won business from the kind of big tech customers it had long struggled to attract.
Jun said Samsung is already working with Nvidia on autonomous driving chips and Groq AI accelerator chips using 4-nanometer and 8-nanometer processes and the two companies are discussing next-generation foundry projects.
As Huang confirmed in March, Samsung is producing Nvidia's Groq LP30 chip and is involved in production for the GPU maker's Drive AGX Thor autonomous driving platform.
Nvidia is among a growing line of top-tier tech customers now working with Samsung Foundry, breathing fresh momentum into a business that logged losses for five straight quarters, through the first quarter of this year.
Samsung signed an eight-year AI chip supply deal with Tesla last year worth about $16.5 billion and has also secured production volume for Apple image sensors. Samsung's lucrative next-generation HBM4 is also emerging as a new driver for the foundry business, as the memory chip uses base dies made on Samsung’s 4-nanometer process.
The chip giant is also in talks with major automakers, including BYD, for potential 2-nanometer and 4-nanometer foundry orders, according to industry sources. If secured, the deals would expand Samsung’s Chinese auto customer base beyond Nio, which uses Samsung’s 5-nanometer process for autonomous driving chips.
Another potential opening is Anthropic. Samsung joined the Claude developer’s latest funding round as a strategic infrastructure partner alongside SK hynix and Micron. Anthropic said the three companies play key roles in memory, storage and logic chip supply.
While no foundry order has been confirmed, Anthropic’s mention of logic chips has raised expectations that Samsung could eventually win production work from the AI company, extending its AI role beyond memory.
Kim Rok-ho, an analyst at Hana Securities, said Samsung's earnings could normalize, as shipments of Nvidia-bound Groq chips and HBM base dies increase on its stabilized 4-nanometer process, helping lift utilization.
"The foundry business could return to profit in the second half of this year," Kim said.
The customer momentum is significant for Samsung, whose foundry business long faced questions over whether major tech firms would entrust advanced chip production to a company that also competes with them in memory, smartphones and system chips. Recent wins suggest those concerns may be easing as AI demand pushes customers to secure more manufacturing options.
Yield gains
Samsung’s technology gains are adding weight to hopes for a foundry recovery.
The company is understood to have raised the yield rate of its 2nm gate-all-around process to above 60 percent as of the first quarter. While still short of the roughly 70 percent level often seen as needed for full mass-production economics, industry officials say it is enough to support initial output and customer talks.
Samsung said in its first-quarter earnings call that utilization at advanced process lines had reached maximum levels, with the business believed to have posted double-digit revenue growth from a year earlier despite seasonal weakness.
Samsung's fab in Taylor, Texas, could also start easing the cost burden. The $37 billion facility has weighed on earnings through construction and depreciation costs, but higher output from the second half could spread those fixed costs across more wafers.
TSMC’s capacity crunch is giving Samsung another opening. With the Taiwanese rival’s advanced-node lines effectively full on AI accelerator demand, some fabless chipmakers are looking at Samsung as an alternative. AMD is also seen as considering a dual-foundry strategy for part of its next-generation GPU production.
By market share, Samsung remains far behind. TSMC took 73 percent of the pure-play foundry market in the first quarter, up from 72 percent in the previous quarter, while Samsung stayed a distant second at 7 percent, according to Counterpoint Research. SMIC followed with 5 percent, UMC with 4 percent and GlobalFoundries with 3 percent.
herim@heraldcorp.com
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