Shell-First: Samsung Foundry’s custom-tailored new operation strategy

As the contract chip manufacturing, or foundry, business is quickly emerging as the next battlefield for the world’s major chipmakers, The Korea Economic Daily is running a series of articles on Samsung Electronics, the world’s second-largest foundry player.

This is the second article in a three-part series on Samsung’s quest for global leadership. Read Part 1.

The Samsung Foundry Forum 2022, held in San Jose, California last month, was worthy of attention in at least two big ways.

This year, the annual gathering of Samsung Electronics Co.’s fabless clients and partners was held offline for the first time in three years due to the COVID-19 pandemic.

Also at this year’s event, which drew more than 500 chip experts from around the world, the South Korean tech giant unveiled its new business operation strategy: Shell-First.

Dr. Siyoung Choi, president and head of the foundry business at Samsung Electronics, said at the forum that the Shell-First strategy is designed to promptly respond to customer needs.

“The success of our customers is the reason for the existence of Samsung Electronics’ foundry business,” he said. “As a partner shaping a better future, Samsung will set a new standard for the foundry industry.”
 

Samsung’s Shell-First strategy for capacity expansion, in short, is to build cleanrooms first – regardless of market conditions – to swiftly respond to customer demand.

With cleanrooms readily available, fab equipment can be installed later and set up flexibly as needed in line with demand.

Through the new investment strategy, Samsung said it aims to modify its equipment to suit individual customers’ requests.

“Foundry is like a hotel business,” said Kye Hyun Kyung, president and CEO of Samsung Electronics Device Solutions Division, which is in charge of Samsung’s entire semiconductor business. “We’re changing our business style to build rooms before welcoming customers.”

WIDENING CLIENT BASE

The move comes as Samsung is widening its foundry client base.

Seven of the world’s top 10 fabless companies – Qualcomm, Broadcom, Nvidia, AMD, Apple, Marvell Technology and Xilinx – are all based in North America, a region that accounts for half of the global foundry industry’s sales.

For Samsung, the world’s second-largest foundry player, the US market is crucial in its efforts to leapfrog its bigger rival, Taiwan Semiconductor Manufacturing Co., to become the non-memory market leader by 2030.

This year marks the 26th anniversary of Samsung's entry into the US semiconductor market.

Samsung hosted its first offline foundry forum since the outbreak of the pandemic in the US, followed by Germany, Japan and Korea.

During the Samsung Foundry Forum 2022, the company also outlined steps its foundry division is taking to strengthen its customer service capabilities across its partner ecosystems.

Those measures include foundry process technology innovation, process technology optimization for each specific application, stable production capabilities and customized services for customers.

According to market research firm Omdia, the 5-nanometer and narrower chip processing market is forecast to grow at an annual average rate of 98% to $53.85 billion by 2025 from $19.45 billion in 2022.

TAYLOR FAB TO CREATE SYNERGY WITH AUSTIN PLANT

Last November, Samsung officially announced its plan to build a $17 billion chipmaking plant in Taylor, Texas in one of the world’s biggest semiconductor markets.

The site of its much-touted next US chip plant in Williamson County is about 25 km from Austin, where its current contract-manufacturing operations are located.

The $17 billion spending, including buildings, property improvements, machinery and equipment, marks the largest-ever investment by Samsung in the US.

Set to start operations in the second half of 2024, the new foundry plant will make advanced logic chips designed by other firms for use in 5G, high-performance computing (HPC) and artificial intelligence applications.

Samsung said it plans to first apply its Shell-First strategy to the second line of the Taylor plant, currently under construction, and expand the system to other factories around the world.

Together with its third line in Pyeongtaek, Korea, the new Taylor fab lines will be Samsung’s hub to achieve its goal of becoming the world’s top producer of system chips by 2030, Samsung officials said.

“The new semiconductor production lines at our Taylor site have played an important role in attracting new projects from clients across the globe," said Kye Hyun Kyung, president and CEO of Samsung Electronics Device Solutions Division.

Write to Haeyoung Park at bono@hankyung.com
In-Soo Nam edited this article.