Samsung Electronics’ semiconductor competitiveness rises to the test of Chiron

The commercial world is constantly changing. If you can’t read the wave of technological change and the direction of the wind, it’s easy to become a shipwreck even for companies that are doing well. Nokia’s downfall is eloquent. As of February 18, the market capitalization of Samsung Electronics in Korea ($497.3 billion, about 560 trillion won) was found to be far behind TSMC ($568.5 billion, about 640 trillion won), a consigned semiconductor manufacturing company in Taiwan. It is shocking considering the difference in gross domestic product and capital market size between Korea and Taiwan.

TSMC was established in 1987, the year following the signing of the US-Japan semiconductor agreement. At that time, the global semiconductor market was dominated by Japanese companies. The “vertical division” of semiconductor production is the artificial reorganization of the semiconductor market by the US, which felt a sense of crisis, pressured Japan. The idea is that upstream industries, such as semiconductor design with high added value, are owned by US companies and require a large amount of investment, but the downstream industries with relatively low added value will be transferred to Asia. It was the former chairman of TSMC founder Morris Chang who read the huge opportunity in the US-Japan semiconductor agreement. TSMC chose Silly, although his pride could have been hurt.

The ecosystem of semiconductor production has also changed significantly. The center of gravity has shifted from fabless, or design, to foundry, or production. So-called technology companies such as Apple, Amazon, Tesla, and Facebook have begun designing’semiconductors suitable for their products’ themselves. They need a consignee that can produce semiconductors with the specifications they want in a timely manner.

As the foundry market grows, TSMC’s strategy to do only consignment production without self-development, that is,’do not compete with customers’, has become’a ​​number of gods’. TSMC, which has been nailed for not competing with customers, has relatively less worries about technology leakage even if it passes the blueprint, so many companies prefer TSMC. On the other hand, Chinese fab (FAB) companies, which are focusing on securing their own development technology with Samsung Electronics, a comprehensive semiconductor company that doubles as a self-development, and semiconductor rollout, are inevitably disadvantageous.

Looking at the foundry alone, TSMC is significantly ahead of Samsung Electronics. Big tech companies such as Apple, Tesla, and AMD are TSMC’s main customers. Intel, a general semiconductor company, has also built trust in the transaction enough to outsource it to TSMC if its company cannot handle all of its supplies. However, Samsung Electronics’ foundry is unpretentious. It was separated into an independent division only in May 2017 from the device solution (DS) division that produces semiconductors. As of 2020, TSMC and Samsung Electronics’ foundry market share is 55.6% vs. 16.4%.

The foundry’s technological competition is to narrow the’circuit line width’. The nano is the basic unit. Extreme UV equipment is required to make products below 5 nanometers, but only ASML in the Netherlands produces about 20 units a year. TSMC, which entered the foundry earlier, has more equipment and is preoccupying an advantageous position. The reality is that TSMC, which has an overwhelming market share and a wide portfolio of circuit lines, is quite advantageous.

In the minds of Koreans, Samsung Electronics is imprinted as a leading semiconductor company. However, this is a’past tense’ and is limited to memory semiconductors. As of 2019, the market share of memory semiconductors, which Samsung Electronics is reigning as an absolute powerhouse, accounts for only 27% of the total market. Samsung Electronics drove out competitors with a chicken game in the past, but the situation in the non-memory market is different. As artificial intelligence, 5G communication technology, and autonomous vehicles become more popular, the proportion of on-demand production foundries increases. Moreover, Samsung Electronics’ foundry is a business structure that’competites with customers’. Special countermeasures, such as division of divisions, should be considered. To make matters worse, even the total number is absent. Samsung Electronics’ competitiveness is on the test bench.

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