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Global chip competition

Samsung to invest $151 bn in foundry by 2030, up 28.5% from initial plan

By May 13, 2021 (Gmt+09:00)

Samsung Electronics Vice Chairman Kim Ki-nam (left) and SK Hynix Vice Chairman Park Jung-ho (right) commit to the national K-Semiconductor Belt initiaive at a kick-off event May 13.
Samsung Electronics Vice Chairman Kim Ki-nam (left) and SK Hynix Vice Chairman Park Jung-ho (right) commit to the national K-Semiconductor Belt initiaive at a kick-off event May 13.

Samsung Electronics Co. will invest 171 trillion won ($151 billion) by 2030 to take over the global foundry leadership from its archrival TSMC. The new amount is 28.5% above the company’s 133 trillion won ($117 billion) investment target set by group heir Jay Y. Lee in 2019. 

Samsung said during the industry-wide K-Semiconductor Belt kick-off on May 13 with South Korean President Moon Jae-in and the Ministry of Trade, Industry and Energy (MOTIE) that it will ramp up investment in the segment to accelerate its push to become the world’s top foundry company by 2030.  

The K-Semiconductor Belt initiative, officially announced on the same day by MOTIE during the event held at Samsung Electronics Pyeongtaek Campus, is a fully fledged public-private partnership project that aims to create the world’s largest chip supply chain by 2030.

South Korean President Moon Jae-in speaks at the inaugural K-Semiconductor Belt event held at Samsung Electronics Pyeongtaek Campus.
South Korean President Moon Jae-in speaks at the inaugural K-Semiconductor Belt event held at Samsung Electronics Pyeongtaek Campus.

Under the project plan, the public sector will provide significant tax cuts up to 50% for R&D projects and up to 20% on facility investment, as well as prime-rate loans by setting up a special fund of one trillion won ($883 million). The government also promised to secure water supply for the country’s chip plants over the next 10 years.

But the industry says stronger measures are needed to counter the Biden administration’s CHIPS for America Act and the Chinese government’s aggressive investment plans of 1 trillion yuan ($155 billion) into the chip sector by 2025.

The country’s private sector, led by Samsung Electronics Co. and SK Hynix Inc., will invest more than 510 trillion won ($450 billion) by 2030 as part of the K-Semiconductor Belt initiative. Samsung will take up the largest portion of the private efforts with an investment of 171 trillion won ($151 billion) in the foundry segment by that year.  

The vast majority of Samsung’s foundry investment will be used for R&D efforts and construction of foundry facilities, with the ultimate goal to overtake market leader TSMC.

There is still a wide market share gap between the two companies. TSMC’s share in the first quarter of this year was 56%, while Samsung only had 18%, according to the global foundry market research firm TrendForce. Nevertheless, industry insiders say that Samsung’s long-term ambition is not unachievable, considering that the two companies are almost on equal footing in the most advanced sub-10 nanometer (nm) process segment.

Samsung also said that its new chip fabrication plant, Pyeongtaek Line 3, will be completed in the second half of 2022, about six months earlier than the original timeline, in response to the enduring global chip shortage.

Once completed, Pyeongtaek Line 3 will be the largest chip manufacturing facility in the world, equivalent in size to 25 soccer fields. The 14 nm DRAM and 5 nm smartphone application processors (AP) will be produced at Pyeongtaek Line 3.

“Our Pyeongtaek Campus, already an important base supplying the most advanced semiconductor chips to all corners of the world, will be taking a more influential role within the industry,” said Samsung.

SK Hynix also shared its foundry investment plans during the meeting with the government and industry representatives. SK said that its foremost step is doubling the production capacity of its foundry affiliate SK Hynix System IC Inc., but it is also considering inorganic growth options such as M&As.

Analysts say that SK Hynix’s decision to expand investment into its foundry business will increase the company’s profile in the semiconductor segment for home appliance, mobile and automobile segments.

They added that in order to strengthen its foundry business, SK Hynix will either have to set up an 8-inch wafer line in its Cheongju plant, which already has a foundry facility, or acquire a mid-sized foundry company in Korea or abroad.     

“In the foundry segment, we are open to all options from ramping up domestic production to pursuing M&As,” SK Hynix Vice Chairman Park Jung-ho said.

Write to Jeong-soo Hwang and Su-bin Lee at hjs@hankyung.com

Daniel Cho edited this article.

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