There is TSMC and there's everybody else, can Samsung or Intel catch up?

[Jay Goldberg]

There is only one company operating at the leading edge of semiconductor manufacturing and that is TSMC. Many will read that and think "Of course, that's obvious," but we mean that in a very specific way (many more will read that and then go back to swiping videos on TikTok, so thank you for sticking around...).

For the past few years, there have actually been two companies operating at the leading edge -- TSMC and Samsung. With all the attention that TSMC gets for both commercial and geopolitical reasons, we found that a lot of people sort of forgot about Samsung. A few years ago that would be a mistake, Samsung was always competitive with TSMC, if a little bit slower and harder to work with. But it is looks like that may change.

Editor's Note:
Guest author Jonathan Goldberg is the founder of D2D Advisory, a multi-functional consulting firm. Jonathan has developed growth strategies and alliances for companies in the mobile, networking, gaming, and software industries.

As usual, Dylan Patel has a good piece on the troubles at Samsung. The quick summary of that piece is that Samsung is facing delays both for its 7nm process and for its DRAM memory products. Read back on some of the press coverage of Samsung over the past year, and it looks a lot like something is really wrong there. Delays. False starts. Mixed messaging. For us, the eeriest part of this is that this is a pattern we have seen many times before. This is what every company looks like just before they fall off the Moore's Law curve.

To be clear, we are not saying that Samsung is going to abandon development of leading edge manufacturing capabilities. They have immense resources and know-how. They have to keep moving forward. But that does not mean they have to structure their business the same way.

More specifically, we have heard a few people argue that Samsung should exit the foundry business, stop manufacturing chips for others and instead focus solely on their highly profitable memory business. We know that there are people within Samsung making this argument, but we have no way to gauge how influential they will ultimately be.

This is why it so important to remember Samsung in discussions about foundries. They have provided an alternative to TSMC for years, but there is a non-zero chance that they may no longer provide that alternative. Again, we are not saying this is going to happen, but in all our discussions about supply chain resiliency it is important to remember that things could actually get worse.

What would that look like?

Here the answer depends a lot on which customer we are talking about. Many of the largest chip companies -- notably Nvidia and AMD -- have long ago moved away from Samsung for the most part and dedicated themselves to TSMC.

They made large order commitments, a process which is now haunting their results. At the other end of the spectrum, almost every small startup chip company we know has never considered working with anyone other than TSMC for the leading edge.

Go here for more graph context; Source: Trendforce

Samsung's foundry business is not easy to work with for small companies, customer service is not their key selling point. Those companies are already living in a world where TSMC is the only option, and they are paying full price for that, with another 20% bump coming soon. That leaves a large group in the middle, Samsung foundry reportedly has over 100 customers, of which Qualcomm is the largest. Even though most of those companies likely work with TSMC as well, losing Samsung as a foundry would cause a lot of pain. This would likely mean product delays and meaningful cost increases -- a.k.a. disruption.

None of this is set in stone. A lot could change. Samsung could make the organizational changes it needs to unstick their manufacturing process improvements. They could get subsidies from the Korean and US governments to "encourage" their remaining around.

Further out, Intel could conceivably turn around its manufacturing and then figure out customer service. But after two years of everyone being constantly surprised to find out how brittle the semis supply chain is, now is a good time for the industry to start doing some scenario analysis and contingency planning.

Permalink to story.

https://www.techspot.com/news/95787-there-tsmc-there-everybody-else-can-samsung-or.html

 

[WhiteLeaff]

I think the US government should invest in GF, they had a lot of potential.

Samsung has been slipping in many fields at the same time, this is a little strange...

 

[dragosmp]

Problem is, when rumors of shutting down start to appear, best people will suddenly realize they may not have a job in a few years and easily search and find preemptively something else. The B-team doesn't have many options, and wait for the shutdown / unemployment. Now let's say afterall Samsung does not shut down their foundry operation, after years of loosing people and not hiring any promising newbies, who is gonna do the work?

Wish them well, but they're circling the drain, and they won't be an alternative for many many years to come. Look at ASML's EUV client list, how many of those machines are reserved by non-TSMC? Yes that's right, and ASML are the only game in town under 7nm.

Very weird right? Is Semi manufacturing such a horribly non-profitable business that we ended up with total monopoly between ASML and TSMC? Would love to read an analysis, there usually is something wrong when such consolidation occurs

 

[dragosmp]

I think the US government should invest in GF, they had a lot of potential.

Samsung has been slipping in many fields at the same time, this is a little strange...

GF was never a power play. It was offloading some old factories outside AMD such that the new entity can sell foundry space to various customers, without them being scared that AMD would learn untoward things on their designs. 16nm is more than good enough for a large majority of DSPs in automotive for example. The same sort of spin-out would have happened with Intel by now if Kikin' Pat would not have been CEO, and might still happen.

 

[Tantor]

Falling behind is not a death sentence. What matters is the company leadership and culture. AMD came back from near death. Then Intel got a little lazy and let AMD take the lead for a while. It's taken them a while to come back against Ryzen.

 

[zamroni111]

Problem is, when rumors of shutting down start to appear, best people will suddenly realize they may not have a job in a few years and easily search and find preemptively something else. The B-team doesn't have many options, and wait for the shutdown / unemployment. Now let's say afterall Samsung does not shut down their foundry operation, after years of loosing people and not hiring any promising newbies, who is gonna do the work?

Wish them well, but they're circling the drain, and they won't be an alternative for many many years to come. Look at ASML's EUV client list, how many of those machines are reserved by non-TSMC? Yes that's right, and ASML are the only game in town under 7nm.

Very weird right? Is Semi manufacturing such a horribly non-profitable business that we ended up with total monopoly between ASML and TSMC? Would love to read an analysis, there usually is something wrong when such consolidation occurs

It's still very profitable but needs lots of capital to be top players.
Asml euv machine is 300+ musd.

 

[Mjsun]

And then there is the Chinese elephant in the room. TSMC is leading edge, but having most of their foundry capacity on Taiwan likely causes further heartache for anyone making a choice of foundries.

 

[zamroni111]

Falling behind is not a death sentence. What matters is the company leadership and culture. AMD came back from near death. Then Intel got a little lazy and let AMD take the lead for a while. It's taken them a while to come back against Ryzen.

Indeed.
Intel was ahead of tsmc up to early 14nm.

 

[psycros]

And then there is the Chinese elephant in the room. TSMC is leading edge, but having most of their foundry capacity on Taiwan likely causes further heartache for anyone making a choice of foundries.

Why would that be a problem? If anything its a benefit because you don't have to deal with China. Taiwan is a country - period. The UN recognizes it as an "independent territory", I.e. a sovereign state. China has exactly ZERO say in Taiwan's internal affairs. We should never, ever have to hear the ludicrous "Chinese Taipei" uttered by anyone outside of the pathetic Chinese regime.

 

[p51d007]

And then there is the Chinese elephant in the room. TSMC is leading edge, but having most of their foundry capacity on Taiwan likely causes further heartache for anyone making a choice of foundries.

Exactly. You know one of two things would happen if China tries to "peacefully" take over Taiwan, like they did Hong Kong.
1. Taiwan would nuke the TSMC plant so the property could not fall into the Chinese hands
2. China would nuke the TSMC plant so the property would stay out of Taiwan & the west's hands
And by nuke, I mean just blow it up, not a nuclear strike. If anyone pops a nuke, it will be like the movie War Games...NO winner.

 

[yRaz]

Why would that be a problem? If anything its a benefit because you don't have to deal with China. Taiwan is a country - period. The UN recognizes it as an "independent territory", I.e. a sovereign state. China has exactly ZERO say in Taiwan's internal affairs. We should never, ever have to hear the ludicrous "Chinese Taipei" uttered by anyone outside of the pathetic Chinese regime.

Have you seen what China is doing around Taiwan? If China decides to go Ukraine on Taiwan we are in big trouble. This is a large reason why TSMC is building factories in other countries. TSMC nolonger believes Taiwan is a secure nation to manufacture on and has even openly told China if it tries to anex Taiwan it will cease manufacturing there

 

[rmcrys]

Have you seen what China is doing around Taiwan? [...] TSMC nolonger believes Taiwan is a secure nation to manufacture on and has even openly told China if it tries to anex Taiwan it will cease manufacturing there

TSMC just doesn't want to have all eggs in one basket. They have a lot of knowledge and money, why bet all of it in Taiwan? That's why they have more factories and backup to their knowledge. They play safe.

About PRC/ China: they have to show who is the boss in Asia, nevertheless they know that 80% of their costumers (money) comes from most NATO affiliated countries. If they force a war, it will happen:
1) most of their income will be lost
2) for decades they will lose trust from other countries, which means, no more knowledge or manufacturing or business or tourism or partnerships
3) with it, that huge amount of population may go very hard against their dictatorship
4) credit and money outside: most Chinese oligarchs have absurd amounts of money outside China. If those NATO countries confiscate that money, those government supporters may also do "something" against that government.
5) I have a hard time to believe that China + Russia would win any war. They would lose for sure, but such war would be the WW3 and all the world would lose. I hope the Chinese (population) put their dictators in a short leash for all sake...

 

[Mr Majestyk]

Samsung exiting this area would be a disaster, already TSMC is too large and uncompetitive and Samsung going would spell disaster for global supplies and for cost increases. The only option would be for Samsung's fabs etc to be sold to a third party or more likely consortium. Who though? Could an Intel, Nvidia, AMD, GloFlo, Qualcomm consortium work? Would they be interested, would they cooperate for their own good. Could Apple be enticed into the group. All these companies would benefit and no one company has to pick up the enormous costs of running these Fabs. Heck keep Samsung in the consortium, but no longer the dominant player.

I have heard very bad things about working for Samsung, they have a worse work culture than a lot of Japanese companies (and I worked for one of them and never again). I'm also not surprised how bad they are to deal with for smaller companies.

 

[Watzupken]

Its very common to hear, "Oh it is too hard/ not making money, so they should get out of the business". Its almost like saying you are second in the class when it comes to results, so you should just quit school... If every company did that, everyone will be trouble. There is nothing wrong being second or third in the business. There is still money to be made.

 

[Watzupken]

Samsung exiting this area would be a disaster, already TSMC is too large and uncompetitive and Samsung going would spell disaster for global supplies and for cost increases. The only option would be for Samsung's fabs etc to be sold to a third party or more likely consortium. Who though? Could an Intel, Nvidia, AMD, GloFlo, Qualcomm consortium work? Would they be interested, would they cooperate for their own good. Could Apple be enticed into the group. All these companies would benefit and no one company has to pick up the enormous costs of running these Fabs. Heck keep Samsung in the consortium, but no longer the dominant player.

I have heard very bad things about working for Samsung, they have a worse work culture than a lot of Japanese companies (and I worked for one of them and never again). I'm also not surprised how bad they are to deal with for smaller companies.

I feel fabs should always be independent, I.e. not owned by any chip company. Once you start having ownership, the company will lose its focus because it will be pulled in different directions by the various owners even assuming they have equal rights in the company. ARM for example may have gone from designing a chip and everyone using it, to veering to some owners' specific needs and getting distracted.

 

[Mr Majestyk]

I feel fabs should always be independent, I.e. not owned by any chip company. Once you start having ownership, the company will lose its focus because it will be pulled in different directions by the various owners even assuming they have equal rights in the company. ARM for example may have gone from designing a chip and everyone using it, to veering to some owners' specific needs and getting distracted.

That's why I said a consortium. There aren't many companies big enough to buy out Samsung's fabs other than Apple. If you can think of better candidates and I'm sure there are, post them. As long as no one company can have more than say 15-20% share and we had a an board independently controlled I think it could work. Better than letting Samsung exit and waiting years for a potential suitor, while TSMC gets even more dominant and out of control.

 

[Dimitrios]

INTEL better catch up since Biden gave him $20B to "build chips in America." Let's keep an eye on this as time goes on. In my opnion nothing will really come out of this. I hope tech sites keep track as the years go on. I believe INTEL will just back out or lower expectations with some sort of crazy excuse and pocket the money.

When I was young and stupid I didn't believe comments like this. As I got older I started to see a pattern.

 

[bexwhitt]

Exactly. You know one of two things would happen if China tries to "peacefully" take over Taiwan, like they did Hong Kong.
1. Taiwan would nuke the TSMC plant so the property could not fall into the Chinese hands
2. China would nuke the TSMC plant so the property would stay out of Taiwan & the west's hands
And by nuke, I mean just blow it up, not a nuclear strike. If anyone pops a nuke, it will be like the movie War Games...NO winner.

UK's lease on Hong Kong ran out, Taiwan is a totally different situation.

 

[Sandyf]

Some basic facts. The official name of Taiwan is Republic of China. The vast majority of independent countries including USA since 1979, don't recognize Taiwan as a separate country but as a part of one China. Taiwan was created as a modern state in 1949 during the civil war of China by the part that lost the civil war. To claim otherwise is to deny basic history.
The Chinese regime is far from pathetic. It has lifted hundreds of millions of people out of poverty and has built the most advanced infrastructure in record time. That's why it enjoys popular support among her population using any metric available.
The power of the western propaganda to deny these basic facts is outrageous.

 

[Sandyf]

One last thing. Whether you like it or not, most of the world treats USA and not China as the basic threat for world peace. Why? Well it's USA that has hundreds of military bases across 100 countries, has waged preemptive wars and regime change operations during the last decades, has sanctioned half of the planet, is spending by far the most money for the military and officially promotes the ideology of American exceptionalism. It's not an accident that the majority of the countries of the global South treats USA with suspicion and not China.
An excellent book by William Blum "Killing Hope" elaborates why USA is a menace to the world.
It is a history book on covert CIA operations and United States military interventions during the second half of the 20th century that made the world a worse place. Additionally there's a vast bibliography that draws the same conclusion.
It's about time to face basic facts.

 

[grexer]

Some basic facts. The official name of Taiwan is Republic of China. The vast majority of independent countries including USA since 1979, don't recognize Taiwan as a separate country but as a part of one China. Taiwan was created as a modern state in 1949 during the civil war of China by the part that lost the civil war. To claim otherwise is to deny basic history.
The Chinese regime is far from pathetic. It has lifted hundreds of millions of people out of poverty and has built the most advanced infrastructure in record time. That's why it enjoys popular support among her population using any metric available.
The power of the western propaganda to deny these basic facts is outrageous.

You must be a CCP lackey, earn your 50 cents yet? The US has always treated Taiwan as a separate country although nor officially saying so. Green card lottery, Taiwan can participate, not China. The immigration waiting list for China and Taiwan are also on 2 different lists. If you truly believe they are the same country, Come to Taiwan with your passport without any visas, why would you need a visa to travel to your own country? Oh wait, you not only need Taiwan to issue you a visa, you also need your own government to approve you to travel to Taiwan, what a joke.

 

[grexer]

I think the US government should invest in GF, they had a lot of potential.

Samsung has been slipping in many fields at the same time, this is a little strange...

What potential are you talking about..... they never delivered anything. The 14nm process they're running right now is licensed form Samsung, and its not that great either cause they never were able to improve it. Intel would be a far better bet, they just need to get their mindset straight, being a foundry is all about customer service, which they're pretty bad at.The 20 billion they got from the CHIPS act? It's not nearly enough, TSMC alone spends 44 billion a year.....

 

[Sandyf]

"In a 1972 joint communiqué with the PRC, the United States "acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China" and "does not challenge that position." It reaffirms the U.S. interest in a peaceful settlement of the Taiwan question."
Taken from the Wikipedia article "One China"

Since when stating the facts makes you a CCP lackey?
And what kind of attitude is this that smears everyone who states these facts as a paid agent?

The irony is that when China was much poorer, exploitative and oppressive towards her working class, the western world had no problem with this and the western antichina propaganda was virtually absent. Their propaganda is in amok now that China is much richer and have lifted 800 millions of people out of poverty just because they can't control her as before.
This doesn't mean that China doesn't have problems. As an original mix of capitalism and socialism, it's a country that is destined to have problems and contradictions. But the problems and the contradictiins of the West are much deeper and difficult to solve, particularly after 4 decades of neoliberal capitalism that has created monstrous inequalities, massive debt and dysfunctional state apparatuses.

 

[merikafyeah]

Some basic facts. The official name of Taiwan is Republic of China. The vast majority of independent countries including USA since 1979, don't recognize Taiwan as a separate country but as a part of one China. Taiwan was created as a modern state in 1949 during the civil war of China by the part that lost the civil war. To claim otherwise is to deny basic history.
The Chinese regime is far from pathetic. It has lifted hundreds of millions of people out of poverty and has built the most advanced infrastructure in record time. That's why it enjoys popular support among her population using any metric available.
The power of the western propaganda to deny these basic facts is outrageous.

The US does not recognize Taiwan as part of the PRC. The US (officially) only acknowledges that it understands that China wishes to claim Taiwan as part of its territory.

Basically the same as a school bully claiming another person's lunch as his own. Everyone around only acknowledges that they hear the bully's claims, not that the right of ownership is actually valid. The only people who agree with the bully are those who are also threatened by the bully (China's economic bullying). But the actual reality is that at no point in all of mainland China's history, has it at any point officially governed the island we know today as 'Taiwan'. That's a fact.

The CCP are the usurpers. The ORIGINAL Chinese government officials fled to Taiwan after the communist takeover, hence the reason why Taiwan refers to itself as the Republic of China, because it's the original governing body of China. Like when a piece of software is taken over and ruined by a bunch of VC's, causing the original developers to leave and fork the software. The fork that is maintained by the founding developers carries the true spirit and essence of that software, even if the name has been changed. Land and title can be usurped, but not the spirit.

To quote president Tsai Ing-wen:
"We do not need to declare independence. We are already independent."

 

[WhiteLeaff]

What potential are you talking about..... they never delivered anything. The 14nm process they're running right now is licensed form Samsung, and its not that great either cause they never were able to improve it. Intel would be a far better bet, they just need to get their mindset straight, being a foundry is all about customer service, which they're pretty bad at.The 20 billion they got from the CHIPS act? It's not nearly enough, TSMC alone spends 44 billion a year.....

GF did not launch a process equivalent to the 7nm TSMC for lack of money, but they were still able to create the 12nm+ that offers almost 80-90% of the advantages that 7nm would bring, with less cost(-50%) of development

At the same time intel had been trying to fix problems with its 10nm process for many years, and look at the size and capital of intel.