Samsung Expects Intel to Expand Foundry, Will US Production Increase?

[Asia Economy Reporter Suyeon Woo] As integrated device manufacturer (IDM) Intel hinted at expanding semiconductor outsourcing, the possibility of Samsung Electronics, the world's second-largest foundry company, increasing semiconductor production in the United States has also grown. Samsung Electronics is reportedly considering a $10 billion expansion of its Austin plant in the U.S. in preparation for large-scale orders from Intel.

On the 22nd (local time), Bloomberg News reported that Samsung Electronics is reviewing the expansion of its Austin plant in Texas to establish semiconductor production processes below 3nm (nanometers). Citing sources, Bloomberg stated, "Construction is expected to start this year, aiming for full operation as early as early 2023," adding, "Samsung is trying to counter its foundry competitor TSMC."

Samsung Electronics Texas Austin Factory Exterior.

This expansion of Samsung Electronics' U.S. plant appears to be linked to Intel's foundry expansion strategy announced on the same day. TSMC, Samsung's direct competitor in the foundry market, revealed its largest-ever capital expenditure plan of $25 billion to $28 billion this year, which includes investing $12 billion to establish a 5nm process foundry plant in Arizona, U.S., by 2029.

Industry insiders expect that under the newly launched Biden administration's policy emphasizing domestic (U.S.) production, it will be difficult for Intel to outsource foundry production outside the United States. Therefore, foundry companies have no choice but to increase capital investment within the U.S.

Pat Gelsinger, Intel's designated CEO, referred to Intel as a "National Asset" during the Q4 earnings announcement, emphasizing that Intel's technology is essentially America's technology. Considering this statement, it seems likely that Intel will produce its next-generation flagship products based on 7nm technology internally to minimize technology leakage, while outsourcing the production of other products to foundry companies' U.S. plants.

Sunwoo Kim, a researcher at Meritz Securities, said, "Intel, which is technically behind in foundry technology, is in a difficult position where strategic decisions to regain technological leadership must consider 'employment' and 'domestic production.' Therefore, Intel's future selection of foundry partners is likely to favor companies that have production bases in the U.S. while ensuring security against technology leakage."

The earnings announcement did not include specific mentions of the long-term foundry plan that everyone expected, and Intel postponed the announcement until after the next CEO's inauguration on February 15. However, the industry expects that even if Intel can internally produce 7nm products in 2023, outsourcing will be inevitable to catch up with the long-term technological gap in ultra-fine processes below 3nm.

Myeongseop Song, a researcher at Hi Investment & Securities, said, "Intel reaffirmed a very formal and fundamental stance, but the forecast that TSMC and Samsung Electronics will benefit remains unchanged," adding, "The benefits of Intel's increased foundry production will primarily go to TSMC up to 5nm, but positive effects are also expected for Samsung Electronics."

Song further added, "From the 3nm process onward, depending on new technology development achievements, yield improvement efforts, and narrowing the competitiveness gap in post-processing, Samsung Electronics may turn strong in market share compared to TSMC."

This content was produced with the assistance of AI translation services.