Samsung plans to significantly increase production capacity, the market is worried that insufficient customer support will lead to overcapacity

A global chip shortage has disrupted production in key industries from automobiles to smartphones. Samsung Electronics recently revealed plans to triple its foundry capacity by 2026, but the market is concerned that this bold move may lead to a high risk of overcapacity due to insufficient customer support.

According to digitimes, in its latest earnings call, Samsung Electronics said it will expand the EUV capacity of its S5 wafer plant in Pyeongtaek, south of Seoul, and may build a new factory in the United States focusing on advanced manufacturing processes to meet the growing demand for customized chips from corporate users.

Taking 2017 as the starting point, Samsung Electronics said that through the production of its S3 and S4 fabs and the first phase of the S5 fab coming online in 2021, the company's current comprehensive foundry capacity has grown to 1.8 times the 2017 level. By 2026, as S5 enters the second phase and plans to start mass production at factories in the United States, its total capacity is expected to soar further to more than three times the 2017 output.

As Samsung Electronics' foundry business will focus on advanced process nodes, the company will have to rely on additional order momentum from existing customers or snatch orders from TSMC's customers to improve its capacity utilization, industry sources said.

However, among the top 10 customers in the world that have launched 5/7nm processes, only Qualcomm, Nvidia and IBM have expressed their willingness to adopt Samsung Electronics' advanced process technology. Apple, MediaTek, AMD, Intel, Xilinx, Broadcom and Bitmain all maintain a stable cooperative relationship with TSMC.

The source added that Qualcomm and Nvidia have also started placing orders with TSMC, but if Samsung Electronics' advanced process yields are lower than they expected, they may shift more orders to TSMC. If so, it will be more difficult for Samsung Electronics to get orders from other potential customers.