The reason that Samsung Electronics’ foundry expansion is inevitable is because of the’big shortage’ of global semiconductors. The global semiconductor shortage phenomenon, which was lit up by the shortage of automotive semiconductors, has already shifted to the information technology (IT) industry. Due to the overflowing orders from large customers around the world, Samsung Electronics is not able to produce as planned the core semiconductor quantities for its strategic smartphones. The Samsung Electronics Foundry Division is expected to be unable to produce as much as required by Samsung Electronics’ wireless division, a customer, of Samsung Electronics’ Exynos 2100, a 5-nano process-based mobile application processor (AP). The same is true of the Exynos 1080, another 5-nano mobile AP that will be supplied to the Chinese smartphone industry. This is because the quantity of Exynos chips must be reduced as orders from other large customers are pouring into the 5-nano process, which has a limited scale.
The global automotive industry is suffering from fear of a shutdown (temporary shutdown) due to the semiconductor supply shortage. Ford Motor Company in the United States shut down three local plants in Brazil, and recently shut down its Louisville, Kentucky plant in the United States. According to major foreign media such as Bloomberg and the Wall Street Journal (WSJ), the US GM appealed to the Taiwanese government to secure semiconductor chips produced by TSMC and managed to avoid factory closure.
GM also urgently issued an internal guideline last month saying, “Secure a year’s worth of semiconductors.” The European Union (EU) also hit SOS on the Taiwanese government to secure semiconductor chips. This is because automakers in the region, such as Germany’s Mercedes-Benz, Audi, and BMW, and France’s Renault Motors, are struggling to procure semiconductors. Hyundai Motor Company and Kia have not yet been directly affected by the shortage of semiconductors. However, it is known that it has recently been working to secure semiconductor stocks to the maximum through primary partners.
Semiconductor Shortage is primarily due to the surge in demand for IT devices due to the spread of non-face-to-face leisure and work with Corona 19. There is also a lot of demand for chips required for server and cloud services to build digital infrastructure. Samsung Securities analyst Lee Jong-wook said, “Demand is supplied throughout the entire semiconductor products, such as mobile APs, sensors, driver integrated circuits (ICs), and power semiconductors, and the entire process ranging from advanced 5 nanometers to the old 0.25 micrometers (μm·1 μm is 1000 nm). Shortage, which overwhelms the market, is spreading.” “As Apple becomes a black hole for semiconductor demand and dominates high-tech processes, orders for semiconductors from Chinese smartphone brands’OVX (Opo, Vivo, Xiaomi) have increased. “It’s a vicious circle with a double booking for the foundry line.”
In particular, the automotive industry is more difficult to obtain semiconductors due to structural weaknesses. Building a modern vehicle requires at least 40 to as many as 150 semiconductors. However, unlike IT, vehicle chips must be customized and undergo strict certification. Naturally, foundry companies have no choice but to allocate production lines for IT semiconductors rather than automotive semiconductors that are difficult to make.
The IT industry is also not in a situation where it can be disabled. In the IT industry, the shortage of semiconductors is expected to cause an increase in the cost of finished IT products such as home appliances, smartphones, and laptops. This is a matter of concern amid concerns over rising prices of memory semiconductors such as DRAM and NAND flash.
Major foundry companies have raised or plan to increase semiconductor unit prices. DB HiTek, which makes TV display driving chips, has decided to increase the semiconductor supply unit price by up to 20% from this year. Taiwanese foundry company UMC and Vanguard International Semiconductor Group (VIS) are known to have already raised semiconductor prices. Trend Force, a semiconductor market research firm, predicted that the price of a controller chip for a solid state drive (SSD) storage device used in PCs and notebooks could rise by 20% during this year.
Among these, TSMC, which dominated 54% of the world‘s foundry market, declared that it will invest up to 28 billion dollars (about 30.900 trillion won) on facility investment this year alone. This is a 62% increase over the previous year. In fact, it is a will to completely outrun Samsung Electronics, the only rival (17% share). TSMC announced in May last year that it will invest 12 billion dollars to build a new 5-nano process plant in Arizona. The plant is scheduled for operation in 2024. In Japan, it is also considering establishing a new plant in Kitakyushu while working with a local equipment company.
The world is waiting for Samsung Electronics’ counterattack card. On the 28th, Samsung Electronics plans to announce its investment plans this year by announcing its final 4Q results. It is estimated that Samsung Electronics spends 9 to 10 trillion won per year to invest in foundry facilities. The industry expects Samsung Electronics to increase its facility investment to more than 12 trillion won this year, including the Austin line expansion.
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