Samsung's semiconductor strategy is shrouded in shadow

Affected by the Japanese government's semiconductor material export control to South Korea, there is a view in the semiconductor industry that Samsung Electronics' "non-memory" strategy will be affected. The reason is that "photoresist", one of the three types of materials restricted by Japan for export, may have an impact on Samsung's production of the most advanced devices. This is related to whether Samsung can be in an advantageous position in future development competition.

According to a recent report on the Nikkei website, Ahn Ki-hyun, executive director of the industry group Korea Semiconductor Industry Association, pointed out that "from the perspective of the wavelength of light, photoresists used in the most advanced exposure device called EUV have become the subject of export restrictions" regarding the photosensitive materials for which Japan has tightened export controls. Based on this, he said that "it may have an impact on Samsung's production lines using EUV for the production of large-scale integrated circuits (LSIs).

According to reports, an EUV costs about 20 billion yen (1 yen is about 0.06 yuan), and the operation is also complicated, but it can make the development of higher-performance semiconductors possible. Currently, it is believed that only Samsung and TSMC can use EUV in mass production lines.

Samsung competes with TSMC in the field of semiconductor foundry production, which is the "brain" of smartphones, and Sony in the field of image sensors. Samsung's global market share is about 20%, ranking second in both cases. Samsung's main business is the memory business that stores data for mobile phones, and large-scale integrated circuits account for less than 5% of the operating profit of the semiconductor business.

However, in the memory market, the US IT giants, which had driven market growth until last fall, stopped investing in servers, and the market situation deteriorated this year. Samsung's operating profit (preliminary value) from April to June 2019 fell sharply by 56% from the same period last year.

According to the report, affected by the changes in market conditions, Samsung announced in April that it would invest huge amounts of money in equipment investment and research and development by 2030. However, the photosensitive materials used in the most advanced processes became restricted, and the plan was frustrated as soon as it was proposed. South Korean semiconductor industry insiders said that "Samsung was hit in the sore spot." Samsung originally planned to increase production of large-scale integrated circuits using EUV in the second half of 2019, but now this plan may be postponed.

According to a report by Taiwan's Juheng.com on July 15, citing Yonhap News Agency, Samsung Vice Chairman Lee Jae-yong's visit to Japan has ensured that Samsung can obtain emergency supplies of three key semiconductor materials to avoid the urgent need for possible production suspension.

Sources said that at a special meeting held on July 13, Lee Jae-yong informed the company's top management that he had obtained enough fluorinated polyimide, photoresist and hydrogen fluoride to avoid production interruptions.