This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
South Korean chaebol Samsung Electronics' chipmaking division Samsung Foundry will manufacture semiconductors for some of the world's largest firms according to report from the Korean media. Samsung introduced its 3-nanometer chipmaking process earlier this year, in a deliberate move that sought to gain a lead over the Taiwan Semiconductor Manufacturing Company (TSMC). TSMC is the world's largest contract chip manufacturer as it controls more than half of the market. Samsung has struggled to catch up with the Taiwanese company, despite the massive resources that are at its disposal. With 3-nanomter, the Korean firm is promising an advanced transistor type called gate all around (GAA) that it developed with the American firm International Business Machines Corporation (IBM).
Geopolitical Tensions Lead To Order Diversification From Taiwan To South Korea Claims Report
The report, which comes courtesy of The Korea Economic Daily, lists down several firms that are interested in Samsung's latest chipmaking process. These include the GPU designer NVIDIA Corporation, smartphone chip provider QUALCOMM Incorporated, IBM and the Chinese firm Baidu. These are not the only firms that have partnered up with Samsung to develop their chips, with the report sharing that a total of six other firms will source their products from the Korean company. However, the earliest deliveries of these products, in "large quantities" according to the report, will start from early 2024.
This timeline is normal for the 3-nanometer products. Switching to TSMC, the company's first batch of 3-nanometer products is thought to be destined for Apple's smartphone upgrade for next year. Apple is TSMC's largest customer, and smartphone processors have easier fabrication requirements when compared to larger chips used in computers and data centers. Once TSMC fine tunes the 3-nanometer node, the next batch will be for firms such as Advanced Micro Devices, Inc (AMD) - that are likely to take place in 2024 as well.
The Korea Economic Daily goes on to add that Samsung will make GPUs for NVIDIA, CPUs for IBM, smartphone processors for Qualcomm and artificial intelligence processors for Baidu. The firms have contacted Samsung because of its new technology, and because they are looking to diversify their semiconductor supply chain.
Quoting an unnamed official at a semiconductor firm, The Daily reports:
“Some companies are cutting down on their transactions with Taiwanese companies. Instead, they are looking for a second and a third supplier in other countries such as Samsung,” said an official at a back-end process firm.
Samsung's 3-nanometer announcement earlier this year was met with skepticism by some industry observers. A central part of developing and introducing new chipmaking technologies is the number of orders that a firm receives. These are crucial to cover the high capital expenditure costs, and to ensure that these costs are recovered in the form of revenue from stable sales.
A key tenet of TSMC"s meteoric rise over the past couple of years has been its close relationship with Apple. This enables the Taiwanese company to dive head on into new technology development, as it already has a strong relationship with the world's largest consumer electronics firm. Samsung, on the other hand, has often suffered from alleged quality issues, and has partly relied on orders from its smartphone division's mobile processors. Apple, which used to secure its processors from the company before, has stopped doing so completely.
