Samsung Electronics has made it clear that it is not planning to spin off its contract chip manufacturing or logic chip design businesses, despite ongoing losses. This decision was confirmed by Chairperson Jay Y. Lee in an interview with Reuters during a visit to the Philippines. While Samsung has long dominated the global memory chip market, the company has been striving to reduce its dependency on memory chips by expanding into contract chip manufacturing (foundry) and logic chip design to process data. However, both of these newer ventures have been financially challenging, incurring billions of dollars in losses due to weak demand.
In 2019, Lee outlined a bold vision for Samsung to overtake Taiwan’s TSMC, the world’s largest contract chipmaker, by 2030. Since then, Samsung has made significant investments in its foundry business, building new manufacturing plants in both South Korea and the U.S. Despite these efforts, sources familiar with the company’s operations have reported that Samsung is struggling to attract substantial orders from customers to fully utilize the new facilities.
During the interview, Lee emphasized that Samsung remains committed to growing its foundry and logic chip businesses, stating, “We are hungry to grow the business. Not interested in spinning (them) off.” This underscores the company’s intention to maintain its expansion efforts, even in the face of adversity.
Samsung’s foundry business, which focuses on manufacturing chips for other companies, is a critical part of the company’s strategy to diversify beyond memory chips. However, the company has been facing significant competition from industry leader TSMC, which counts major tech firms such as Apple and Nvidia among its clients. Samsung’s struggle to secure similarly large orders has raised concerns about its ability to achieve the ambitious goals it set for itself in the foundry space.
The company’s challenges are further complicated by difficulties related to the construction of a new chip factory in Taylor, Texas. Lee noted that the project is facing hurdles due to the changing political landscape in the U.S., hinting at potential uncertainties surrounding the upcoming presidential election. Earlier this year, Samsung delayed the production schedule for the Taylor facility from late 2024 to 2026, opting for a phased approach to operations based on customer demand. This delay reflects the broader struggles Samsung faces in scaling up its foundry business amidst uncertain market conditions.
In recent years, South Korean companies, including Samsung, have been major investors in the U.S. economy, particularly in industries like green energy and semiconductors, spurred by Washington’s financial support. However, as Lee alluded to, the evolving political situation in the U.S. has made some South Korean companies cautious, with firms like LG Energy Solution re-evaluating their plans due to possible policy shifts after the U.S. presidential election in November.
Despite these challenges, Samsung remains determined to make headway in the foundry and logic chip design sectors. The company is betting on these ventures to create new revenue streams and reduce its dependence on the cyclical memory chip market. However, last year, Samsung’s foundry and System LSI businesses posted a combined operating loss of 3.18 trillion won ($2.4 billion), according to analysts’ estimates. The losses have weighed heavily on Samsung’s overall financial performance, raising questions about whether the company’s aggressive expansion into these areas will pay off in the long run.
As the global semiconductor industry continues to evolve, Samsung’s ability to successfully grow its foundry and logic chip businesses will be crucial in determining its future position in the market. While the company’s commitment to these sectors remains strong, it faces stiff competition from established players like TSMC, along with challenges related to political and economic uncertainty. The coming years will be critical for Samsung as it navigates these complexities and works toward achieving its ambitious goals in the chipmaking space.