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Will Samsung follow TSMC's price hikes?

Samsung Group is expected to funnel 60% of its $200 bn investment into semiconductor business

By Aug 26, 2021 (Gmt+09:00)

Samsung Electronics Vice Chairman Jay Y. Lee (front right) visits the company's foundry plant in Korea in January
Samsung Electronics Vice Chairman Jay Y. Lee (front right) visits the company's foundry plant in Korea in January

Samsung Electronics Co., the world’s largest memory chip maker, is expected to raise foundry prices in the near term as surging demand is outpacing supply and massive investment has hurt profitability.

The foundry industry leader Taiwan Semiconductor Manufacturing Co. (TSMC) decided to ramp up prices on products by as much as 20%, according to local media reports. The No. 3  foundry maker United Microelectronics Corp. (UMC) also plans to hike prices in September, November and early next year. Those Taiwanese chipmakers already increased prices by 10-20% in the first half.

Samsung already indicated it will join the foundry price hikes.

“We will rationalize foundry prices,” said Samsung’s vice president Suh Byung-hoon when they announced the second-quarter earnings last month. The company expected revenue from its foundry business unit to rise more than 20% this year.

Seoul National University’s professor Jaeyong Song predicted a hike in the fourth quarter.

“Samsung’s production line is so full that it outsourced production of some application processors for Galaxy,” Song said, referring to its flagship smartphone.


The industry forecast prices will stay high until major players complete capacity expansions, given the overwhelming demand.

Few foundry makers are worried about losing customers to competitors despite price increases as they are operating factories at full capacity. GlobalFoundries CEO Tom Caulfield expected supply to stay insufficient until 2022, at least.

Their price hikes are predicted to raise production costs of not only global tech giants such as Apple Inc. but also automakers. The car industry has already been suffering from the automotive chip shortage.

“Semiconductors cost around $300 per car seven years ago. But they rose to $600-$700 in the first half. For luxury models, prices exceeded $1,000,” said Lee Hang-koo, executive adviser at the Korea Automotive Technology Institute.

Global foundry companies made massive investments in capacity expansion, research and development and facilities such as those with extreme ultraviolet lithography (EUV) machines, at the expense of profitability.

“They need to use upgraded EUV machines from the 2 nm process. EUV devices, which already cost more than 200 billion won ($170.9 million), will be more expensive, but have to be ordered in a preemptive manner to keep competitiveness,” said Hanyang University professor Park Jae-gun.
Light source for a semiconductor EUV machine
Light source for a semiconductor EUV machine


Samsung Group plans to invest a combined 240 trillion won over the next three years in its core business, including the semiconductor sector.

Based on its previous plans, the group is expected to spend about 150 trillion won, or about 60% of its much-discussed investment on the semiconductor business, industry sources said. When the group unveiled a 180 trillion won investment plan in 2018-2020, it said would spend 100 trillion won in the sector.

Samsung is predicted to set aside 50 trillion won for the foundry business and the remaining 100 trillion won for the memory chip business. In 2019, Samsung Electronics said it planned to invest 133 trillion won in system chips including foundry in the next ten years. It also said in May this year it would increase the investment to 171 trillion won.
Samsung Electronics' semiconductor plants in South Korea
Samsung Electronics' semiconductor plants in South Korea


The group is expected to acquire other companies to enhance the semiconductor business. Samsung Electronics said it has been seeking firms for M&A deals over the past few years.

Some speculated Samsung Electronics may take over automotive chip makers given the recent shortage of the components. JPMorgan picked a Dutch auto-chip specialist NXP Semiconductors as a strong candidate. But Samsung Electronics will have to pay up to 80 trillion won, the industry estimated, casting doubts over the potential acquisition.

The global semiconductor industry’s reorganization is speeding up.

Western Digital Corp. is in advanced talks to merge with Japan’s Kioxia Holdings Corp. in a deal that could be valued at more than $20 billion and further reorder the global chip industry, the Wall Street Journal reported.

The merger between the world’s No. 2 and No. 3 NAND memory makers could create a giant with a combined market share of 33.4%, threatening Samsung Electronics, which dominates the global market with a 33.5% share, according to Taiwan-based market researcher TrendForce.

Earlier this month, Analog Devices Inc. completed a takeover of Maxim Integrated Products Inc. by gaining approval from China’s antitrust body. Advanced Micro Devices Inc. (AMD) is set to acquire Xilinx Inc. while Nvidia is seeking to buy ARM.

Write to Su-Bin Lee, Hyung-Kyu Kim and Jung Dong Noh at

Jongwoo Cheon edited this article.
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