Intel's US Investment and Foundry 'Counterattack'... Samsung's Semiconductor Concerns Likely to Deepen

Pat Gelsinger Intel CEO (Photo by Intel)

[Asia Economy Reporter Jeong Hyunjin] As Intel launches a decisive counterattack with a massive $20 billion (approximately 22.6 trillion KRW) investment and its foundry (semiconductor contract manufacturing) business, Samsung Electronics' concerns have deepened. Although Intel mentioned Samsung Electronics as an external foundry partner, the semiconductor industry's competition is expected to intensify further as Intel, supported actively by the U.S. government, aggressively moves forward following Taiwan's TSMC at the onset of the semiconductor supercycle (period of booming demand). Industry insiders express concerns that Samsung Electronics, which is struggling amid efforts for semiconductor self-reliance in the U.S., Japan, China, and now Europe, might find itself in a 'sandwich' situation due to Intel's declaration to enter the foundry market.

Intel Supported by U.S. Government... "Securing Leadership"

On the 23rd (local time), foreign media evaluated the announcement made by Intel CEO Pat Gelsinger during an online event as "a direct challenge to TSMC and Samsung Electronics, which produce the most advanced semiconductors." Intel, which had been lagging in semiconductor technology development and production across the board in recent years, has introduced a new strategy alongside U.S. investments following Gelsinger's appointment as CEO, aiming once again to seize 'leadership.' Gelsinger stated, "We have established Intel Foundry Services, a vertically integrated and independent foundry division," adding, "Several companies have already shown strong support for this."

In particular, Intel's announcement is expected to gain momentum as it comes amid the U.S. government's efforts to secure semiconductor supply chains. Although Gelsinger said, "This decision was not made because of government support," he mentioned contracts with government entities such as the Department of Defense alongside private companies like Qualcomm and Apple throughout the event, indicating that the Biden administration's interest could have a positive impact. This also leaves open the possibility of U.S. IT companies partnering with Intel.

Cautious Samsung Electronics Faces Inevitable 'Tension'

[Image source=Yonhap News]

For Samsung Electronics, the emergence of a strong competitor inevitably causes tension. Recently, Samsung has been cautious in making investment decisions. It is currently discussing and reviewing U.S. investments, including the expansion of its semiconductor plant in Austin, Texas, with local governments but has yet to reach a conclusion. Meanwhile, the Austin plant has not resumed operations even a month after shutting down due to a record-breaking cold wave in the U.S. last month.

Regarding the strategic mergers and acquisitions (M&A) mentioned during the earnings announcement in January, Samsung is also showing a cautious stance rather than presenting concrete plans. Kim Ki-nam, Vice Chairman of Samsung Electronics, said at the regular shareholders' meeting on the 17th, "We are exploring M&A targets across various fields for sustainable growth," adding, "Given the current internal and external uncertainties, it is difficult to specify the timing of execution." Another factor making large-scale investments difficult is that Samsung's leader, Vice Chairman Lee Jae-yong, is currently serving a 2.5-year prison sentence related to the political scandal.

Of course, there are evaluations that Intel still lacks the capability to expand its foundry business enough to threaten Samsung Electronics and TSMC. Since the two companies are already industry leaders and are expected to invest nearly $30 billion each this year, Intel's investment scale and current technological level are unlikely to surpass them easily. However, as Intel expressed its intention to expand business centered on the U.S. and Europe, stating that "foundries concentrated in Asia need to be geographically balanced," support from these countries could become another variable.

"Strengthening Cooperation with External Foundries"

Another notable part of CEO Gelsinger's remarks that day was the 'expansion of cooperation with external foundries.' He mentioned TSMC, Samsung Electronics, Taiwan's UMC, and the U.S.'s GlobalFoundries, ranked 1st to 4th in the foundry industry, emphasizing that Intel would compete for an advantage in the foundry market by aligning costs and schedules. This means that while growing its own foundry business, Intel also plans to strategically place orders with external foundries.

Although the webcast did not specify which components would be entrusted to which companies, it is expected to focus on existing contract items such as graphics processing units (GPUs) and artificial intelligence (AI) processors. However, CEO Gelsinger mentioned the 2023 central processing unit (CPU) roadmap, stating, "We plan to deliver innovative CPU products for client and data center customers through cooperation with TSMC," indicating that Intel will strengthen its relationship with TSMC.

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