Foreign media questioned Samsung: Where are the 3nm customers?

Samsung Electronics announced on June 30 that it has mass-produced 3-nanometer chips, becoming the world's first and demonstrating its ambition to catch up with TSMC in the foundry business. However, Nikkei Asia reported today that Samsung did not disclose any customer information, which led to questions from people in the financial district of Seoul, "Who are the customers?" The importance of this question lies in the fact that customers who purchase the first batch of chips can prove the quality of the chips.

Samsung's press release in late June announcing the production of 3-nanometer chips said only that the chips would initially be used for "high-performance computing applications." The report said the chips would not be produced at the Pyeongtaek manufacturing plant but would be manufactured at the Hwaseong complex, which is also where manufacturing technology is developed, prompting observers to suspect that the scale of production would be small.

The report said that according to suppliers and other sources, the first recipients of the computing chips will include cryptocurrency miners in China, but due to the recent slump in cryptocurrency prices, those customers may not be reliable in the long run.

The report said Samsung's foundry business has been accused of problems since the beginning of 2021. The company began mass production of 5nm chips in the second half of 2020, but failed to improve the yield rate. Samsung was unable to provide a stable supply of smartphone chips to Qualcomm, its largest customer. Ultimately, Qualcomm expanded its orders to TSMC last fall, causing Samsung to lose orders.

Three years ago, South Korea's Samsung Electronics declared that it would become the world's largest chip manufacturing foundry leader. Three years later, its biggest rival TSMC has captured a larger market share, prompting Samsung to replace several senior executives.

Samsung announced on June 30 that it had begun mass production of 3-nanometer chips, becoming the first company to reach this milestone, seemingly taking the lead in the advanced chip race, but the announcement did not tell the full picture. A source in Yeouido, South Korea's financial district, asked, "Who is the customer?"

This question is very important. Although chip size is a key indicator of a manufacturer's technical capabilities, "who is the customer" can better prove the manufacturer's technical strength, and the first shipment target is even more significant.

Samsung has not yet revealed a list of customers for its 3-nanometer chips, saying only that they will initially be used for "high-performance computing applications." Samsung is not mass-producing 3-nanometer chips at its Pyeongtaek plant, which has the latest manufacturing equipment, but at its Hwaseong plant, where it develops manufacturing technology, prompting observers to speculate that the scale of mass production is small.

Suppliers and other sources said the first customers for Samsung's computing chips will include cryptocurrency miners in mainland China, but these customers may not be relied on for long due to the recent collapse in the value of cryptocurrencies.

Since the beginning of last year, all walks of life have pointed out problems with Samsung's wafer business. Samsung began mass production of 5-nanometer chips in the second half of 2020, but was unable to improve the yield rate, and thus could not stably supply smartphone chips to Qualcomm, its largest customer. Finally, Qualcomm expanded the number of orders outsourced to TSMC in the fall of 2021, causing Samsung to lose orders.

On the other hand, TSMC, which started mass production of 5-nanometer chips at about the same time as Samsung, has also become the main foundry for Apple's central processing unit (CPU) chips. Since Apple's iPhone is the best-selling smartphone, the CPU must be manufactured and shipped in a very short period of time. Currently, except for TSMC, other manufacturers' manufacturing equipment and technology are extremely difficult to meet this requirement.

Due to the different performances of TSMC and Samsung in 5nm chips, TSMC has further widened its lead over Samsung. According to TrendForce data, TSMC has captured 56.3% of the foundry market, ranking first, far higher than the second-place Samsung's 16.3%.

TSMC's expertise is foundry, so it can focus on investing in cutting-edge technology. The company's capital expenditure is expected to increase by 46% to US$44 billion this year, of which 70% to 80% will be used for advanced products. TSMC is preparing to mass-produce 3-nanometer chips by the end of this year and is also adding a production base in Hsinchu and Tainan.

From the perspective of Apple and other customers, choosing TSMC also has huge benefits. Compared with Samsung, TSMC is not a direct competitor of these customers in the smartphone market, so they can entrust their confidential chip design data to TSMC with greater peace of mind. TSMC's ready-made design data is also particularly complete and can support customers' semiconductor design.

*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.

Today is the 3097th content shared by "Semiconductor Industry Observer" for you, welcome to follow.