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Samsung Electronics feeling pressure to expand US chip plant

Samsung Electronics Vice Chairman Lee Jae-yong, second from left, inspects the company's foundry facility at its Pyeongtaek plant, Jan. 4. / Courtesy of Samsung Electronics
Samsung Electronics Vice Chairman Lee Jae-yong, second from left, inspects the company's foundry facility at its Pyeongtaek plant, Jan. 4. / Courtesy of Samsung Electronics

By Baek Byung-yeul

Chances are increasing that Samsung Electronics could secure an outsourcing deal for its foundry to produce 7-nanometer chips for Intel as its own plan to produce its computer processors using more microscopically small transistors has been disrupted.

Thanks to the expectation that Samsung may manufacture Intel's computer chips, the Korean tech giant's stocks have been enjoying the bulk of investors' attention and buying demand because they believe the foundry business, which refers to contract-based chip manufacturing for chip-designing companies, could become one of Samsung's stable growth engines.

Given Samsung, the world's leading memory chip maker, is forecasted to see soaring memory chip demand globally, stock analysts presumed the company's stock price will likely to go up to 150,000 won ($136.30) per ordinary share within the first half of this year. Shares of Samsung Electronics closed at 90,600 won Tuesday.

A high-ranking official in the semiconductor industry here said Tuesday that Intel is likely to outsource some of its 7-nanometer chip production to the Korean tech giant as well as Taiwan's TSMC, the leading company in the foundry industry.

"Intel is likely to outsource its chip production to TSMC and Samsung. Though TSMC is expected to take a larger portion of production of Intel chips, Samsung is also forecasted to receive an order from Intel," the official said.

Intel previously said the production of 7-nanometer chips will begin as early as 2023. In October, Intel CEO Bob Swan said on a conference call that "we have another great lineup of products in 2022, and I'm increasingly confident in the leadership our 2023 products will deliver on either Intel 7-nanometer or external foundry processes, or a combination of both."

Samsung has been trying to develop its foundry business with an aim to generate a new source of profit from the business. The company clarified in 2019 that it would become a leader in the foundry business by 2030, edging out TSMC. Currently, Samsung holds the second-largest market share, but remains a ways behind the Taiwan-based company. In 2020, TSMC had a 54 percent share in the foundry market while Samsung had 17 percent.

Expansion at Austin plant?

However, the two players have been in tight competition in the under-10-nanometer chip production segment as Samsung has increasingly secured chip-production deals from global chip design firms including Intel, Qualcomm and Nvidia.

Samsung Electronics' foundry facility in Pyeongtaek, south of Seoul / Courtesy of Samsung Electronics
Samsung Electronics' foundry facility in Pyeongtaek, south of Seoul / Courtesy of Samsung Electronics

Though investors and analysts paint a rosy picture for Samsung, the company is also under pressure to expand semiconductor production lines in its U.S. factory in Austin, Texas.

Semiconductors have been increasingly considered as strategically important components and securing chip-producing capability has become more important than ever, as the U.S. is embroiled in a trade dispute with China.

Industry analysts said it will be difficult for Samsung to turn down the U.S. government's pressure to produce more semiconductors in the U.S. as the company wants to establish a relationship with the new administration which will be led by President-elect Joe Biden.

The U.S. government already made its indirect expression of requiring Samsung to expand its chip manufacturing facility in Texas.

The U.S. Department of Defense announced last month it will reportedly will start accepting proposals for a program to provide incentives for boosting the country's chip manufacturing capabilities. The Department of Defense plans to announce a program called Rapid Assured Microelectronics Prototypes (RAMP-C) to encourage chip production in the U.S.

TSMC is at the forefront of the move. The company already announced its plans to build a chip-making plant in Arizona in 2020. The Taiwanese firm said the decision to build the plant is to enhance its partnership with the U.S. government, adding the new factory will create over 1,600 high-tech professional jobs and thousands of indirect jobs.

Samsung Electronics said "there is nothing to comment on this issue."


Samsung Electronics Vice Chairman Lee Jae-yong, second from left, inspects the company's foundry facility at its Pyeongtaek plant, Jan. 4. / Courtesy of Samsung Electronics
Samsung Electronics Vice Chairman Lee Jae-yong, second from left, inspects the company's foundry facility at its Pyeongtaek plant, Jan. 4. / Courtesy of Samsung Electronics

By Baek Byung-yeul

Chances are increasing that Samsung Electronics could secure an outsourcing deal for its foundry to produce 7-nanometer chips for Intel as its own plan to produce its computer processors using more microscopically small transistors has been disrupted.

Thanks to the expectation that Samsung may manufacture Intel's computer chips, the Korean tech giant's stocks have been enjoying the bulk of investors' attention and buying demand because they believe the foundry business, which refers to contract-based chip manufacturing for chip-designing companies, could become one of Samsung's stable growth engines.

Given Samsung, the world's leading memory chip maker, is forecasted to see soaring memory chip demand globally, stock analysts presumed the company's stock price will likely to go up to 150,000 won ($136.30) per ordinary share within the first half of this year. Shares of Samsung Electronics closed at 90,600 won Tuesday.

A high-ranking official in the semiconductor industry here said Tuesday that Intel is likely to outsource some of its 7-nanometer chip production to the Korean tech giant as well as Taiwan's TSMC, the leading company in the foundry industry.

"Intel is likely to outsource its chip production to TSMC and Samsung. Though TSMC is expected to take a larger portion of production of Intel chips, Samsung is also forecasted to receive an order from Intel," the official said.

Intel previously said the production of 7-nanometer chips will begin as early as 2023. In October, Intel CEO Bob Swan said on a conference call that "we have another great lineup of products in 2022, and I'm increasingly confident in the leadership our 2023 products will deliver on either Intel 7-nanometer or external foundry processes, or a combination of both."

Samsung has been trying to develop its foundry business with an aim to generate a new source of profit from the business. The company clarified in 2019 that it would become a leader in the foundry business by 2030, edging out TSMC. Currently, Samsung holds the second-largest market share, but remains a ways behind the Taiwan-based company. In 2020, TSMC had a 54 percent share in the foundry market while Samsung had 17 percent.

Expansion at Austin plant?

However, the two players have been in tight competition in the under-10-nanometer chip production segment as Samsung has increasingly secured chip-production deals from global chip design firms including Intel, Qualcomm and Nvidia.

Samsung Electronics' foundry facility in Pyeongtaek, south of Seoul / Courtesy of Samsung Electronics
Samsung Electronics' foundry facility in Pyeongtaek, south of Seoul / Courtesy of Samsung Electronics

Though investors and analysts paint a rosy picture for Samsung, the company is also under pressure to expand semiconductor production lines in its U.S. factory in Austin, Texas.

Semiconductors have been increasingly considered as strategically important components and securing chip-producing capability has become more important than ever, as the U.S. is embroiled in a trade dispute with China.

Industry analysts said it will be difficult for Samsung to turn down the U.S. government's pressure to produce more semiconductors in the U.S. as the company wants to establish a relationship with the new administration which will be led by President-elect Joe Biden.

The U.S. government already made its indirect expression of requiring Samsung to expand its chip manufacturing facility in Texas.

The U.S. Department of Defense announced last month it will reportedly will start accepting proposals for a program to provide incentives for boosting the country's chip manufacturing capabilities. The Department of Defense plans to announce a program called Rapid Assured Microelectronics Prototypes (RAMP-C) to encourage chip production in the U.S.

TSMC is at the forefront of the move. The company already announced its plans to build a chip-making plant in Arizona in 2020. The Taiwanese firm said the decision to build the plant is to enhance its partnership with the U.S. government, adding the new factory will create over 1,600 high-tech professional jobs and thousands of indirect jobs.

Samsung Electronics said "there is nothing to comment on this issue."


Baek Byung-yeul baekby@koreatimes.co.kr

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