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Opinion: Samsung can make it big in foundry biz

Posted: 17 Dec 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Samsung foundry? DRAM? NAND flash?

South Korea's Samsung Electronics Co. Ltd plans to challenge Taiwan Semiconductor Manufacturing Co. Ltd at the foundry game. Is Samsung serious? Should others take the company seriously?

I say yes, and yes.

And the reason is: When Samsung puts its corporate will to something, it slowly and surely executes. It may take years, but Samsung gets it done. Its very existence is a testament to South Korea's long-term strategic approach.

As a result Samsung is the world's second largest semiconductor maker. With sales of $20 billion in 2008 it was roughly twice as large as its nearest competitors, who include TSMC among their ranks.

In its aspiration to rival TSMC in foundry, Samsung is keeping faith with manufacturing in exactly the way that the likes of Texas Instruments, STMicroelectronics, Freescale and the old crowd of IDMs are not. In terms of leading-edge logic the world is polarizing into the fabless and the foundries. Those western IDMs are choosing to outsource their leading-edge CMOS logic manufacturing requirements to foundries. Samsung has chosen to be one of the makers that will pick up that business, and the evidence shows they can deliver.

Consider how Japanese chipmakers led the DRAM market in the 1980s. In 1990 Japan was responsible for 70 percent of the world's DRAM production but by 1995 the world's largest DRAM maker was Samsung with $6.4 billion sales and 16 percent market share.

Foundry venture
Having reached the number one spot in DRAM, Samsung made a drive into NAND flash memory. In 2008 Samsung was the world's largest NAND flash maker with $4.6 billion in revenue and 40 percent market share.

In about 2006 Samsung decided it should offer foundry services. In terms of the tick-tock of process technology development and generations of customer products that is a very recent decision.

But Samsung is already making progress. Sales have climbed from $75 million in 2006 to about $380 million in 2008. Of course, 2009 will not be pretty, but then again slipping sales will be the pattern across the whole of the industry in 2009. And Samsung has won big-name customers such as Qualcomm, Xilinx and perhaps others. Samsung is also part of the IBM Common Platform Alliance, which is developing R&D technology, and Samsung's announcement about the development of sub-28nm foundry processes shows that Samsung will be in there pitching in the next decade when many others will have left the field.

We must also consider that Samsung has little choice. Given that it has risen to the top in memory and used its economies of scale to drive down price and squeeze margins it now needs to move into logic production.

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