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Semiconductor rivalry

Samsung loses ground in foundry market as TSMC ties in with Japanese firms

The Taiwanese firm has widened its lead following Samsung's brief Austin plant shutdown

By Jun 01, 2021 (Gmt+09:00)

Samsung Electronics' chip clean room
Samsung Electronics' chip clean room

Samsung Electronics Co., which is losing share of the global foundry market, has come under increased pressure from its bigger rival Taiwan Semiconductor Manufacturing Co.'s (TSMC) strategic partnership with Japanese chipmakers.

The Taiwanese company’s move, widely reported on June 1, comes amid an industry outlook that global demand for memory chips, the mainstay products of the South Korean tech giant, may not be as strong as earlier forecast.

According to the Nikkei and other media outlets on Tuesday, Japan has signed off on a 37-billion-yen ($337 million) semiconductor research project to develop cutting-edge chip technology in the country with foundry leader TSMC.

About 20 Japanese companies, including Hitachi High-Tech Corp., will work with TSMC in the project, with the Japanese government paying just over half of the cost, according to the media reports.

The project, backed by Japan’s Ministry of Economy, Trade and Industry, is said to be focusing on research and development of chip packaging, the final stage of semiconductor device fabrication.

Construction of facilities near Tokyo will start around September, with full-scale R&D projects expected to kick off in 2022, the reports said.

TSMC, the world's largest foundry chipmaker
TSMC, the world's largest foundry chipmaker

TOKYO’S DESIRE TO ADVANCE TECHNOLOGY

Analysts said Japan has wanted to cooperate with the Taiwanese company to help its chip manufacturers remain competitive as semiconductor demand grows with the expansion of 5G infrastructure, autonomous driving technology and artificial intelligence (AI).

Japanese companies are expected to benefit from the TSMC partnership as they are strong in the areas of chip components, equipment and NAND flash memory fabrication, but lag in the foundry market, where chipmakers make chips for fabless companies and chip design firms.

Japan’s government also wants enhanced ties between TSMC and Sony Corp. in the image sensor segment, according to media reports.

Sony, the world’s largest image sensor maker with a 47.6% share of the global market as of 2020, consigns the bulk of such chip production to TSMC.

A Samsung Electronics employee examines a wafer.
A Samsung Electronics employee examines a wafer.

TSMC’S LEAD OVER SAMSUNG WIDENS

Analysts said TSMC’s latest move could threaten the status of Samsung Electronics, which is struggling to keep up with its bigger rival.

According to industry tracker TrendForce, TSMC’s lead in the foundry market over its immediate follower Samsung widened in the first quarter.

Samsung’s foundry market share fell to 17% in the first quarter from 18% in the previous quarter due to the temporary shutdown of its chip plant in Austin, US.

By contrast, TSMC’s market share increased to 55% from 54%, extending its lead over Samsung to 38 percentage points.

Samsung’s uphill battle comes as electronics companies, among the key customers of Samsung chips, are seen reducing their production of electronics goods due to a shortage of system chips such as display driver ICs (DDIs) and microcontroller units (MCUs).

The two top foundry players have been upping the ante in their quest for global leadership by aggressively expanding facilities.

Samsung is known to be spending 10 trillion won a year to develop its foundry technology, compared to TSMC’s 30 trillion won a year investment.

Write to Jeong-Soo Hwang at hjs@hankyung.com

In-Soo Nam edited this article.

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