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Samsung plans to triple foundry chip production capacity by 2026

Written by Nikkei Asia Published on     3 mins read

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The tech giant’s Q3 net profit surges 31% amid strong semiconductor demand.

Samsung Electronics said Thursday that it plans to triple its foundry production capacity by 2026 amid a global chip shortage disrupting production in key industries from autos to smartphones as it reported strong third quarter earnings.

The world’s biggest chipmaker by sales said that it will expand its production lines in Pyeongtaek, south of Seoul, and may build a new factory in the US to meet rising demand for the chips that are made-to-order for corporate customers. The South Korean tech giant is working to raise its game in the foundry business and plans to make the components more cost-effective.

“We plan to expand our capacity about three times by 2026 to meet customers’ needs as much as possible by expanding capacity in Pyeongtaek as well as considering establishing a new plant in the US,” Han Seung-hoon, a Samsung executive, said on the company’s earnings conference call.

Han’s comments come as global chipmakers are keen to make inroads in the foundry sector led by Taiwan Semiconductor Manufacturing Co. which boasts a global market share of 53%. Samsung is far back in the No. 2 position at 17%, while GlobalFoundries of the US follows at 6%, according to a market researcher Statista. Leading US chipmaker Intel, meanwhile, announced in March that it plans to become a major provider of the US- and Europe-based foundry capacity to meet surging global demand for semiconductors.

Samsung also reaffirmed that it is scheduled to produce its first 3 nm-based chip designs for customers in the first half of 2022, while its second generation of 3 nm is expected in 2023. “The foundry business is expected to continue to deliver strong improvements in results by securing technology leadership through 3-nm gate-all-around process and by meeting demand through active investments,” Han said.

Analysts say that Samsung’s foundry sales will triple in five years and add several hundreds of customers.

“Samsung foundry is supporting clients with a stable platform, having a cooperative ecosystem,” Lee Su-bin, an analyst at Daishin Securities, wrote in a report ahead of the earnings release.

Lee said that Samsung’s client numbers are increasing sharply, reaching more than 100 this year from 35 in 2017. Lee expects that to hit over 300 in 2026.

For its earnings, Samsung said that net profit during the July-to-September period soared 31.3% to KRW 12.3 trillion (USD 10.5 billion) from the same period last year.

It also said that operating profit jumped 28% to KRW 15.8 trillion in the third quarter from a year ago, in line with guidance issued earlier this month. But revenue was revised higher, increasing 10.5% to KRW 74 trillion during the same period. Quarter-on-quarter, operating profit rose 25.9%, while revenue increased 16.2%.

By sector, memory chips led earnings, thanks to robust demand for DRAM and NAND chips amid the coronavirus pandemic. The mobile sector also contributed as Samsung’s latest foldable smartphones—the Galaxy Z Fold3 and Flip3, which launched in August—have been popular globally.

Despite strong results this year, Samsung’s stock price has underperformed as investors are concerned that a cyclical downtrend in memory chips could soon emerge and weigh on the company’s value.

But investors bought Samsung shares on Thursday, sending them 0.29% higher in early afternoon trading after earnings were released just before the market open.

This article first appeared on Nikkei Asia. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei.

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