The Gap with TSMC Remains, and Now Intel... Will Samsung Also Join the Big Deal? (Comprehensive)

Intel Pursues Acquisition of GlobalFoundries, the 4th Largest Foundry Company

[Asia Economy Reporters Heungsun Kim and Hyunjin Jung] On the 16th, foreign media reported that the US comprehensive semiconductor company Intel is negotiating to acquire GlobalFoundries, the world's 4th largest foundry (semiconductor contract manufacturing) company, with an investment of $30 billion (approximately 34.26 trillion KRW), causing tension in the domestic semiconductor industry including Samsung Electronics and SK Hynix. This is seen as a significant shift as Intel, which had focused on central processing units (CPUs), declared its entry into the foundry market and is now taking concrete steps. Samsung Electronics, which had set a goal to become the world's number one in the system semiconductor sector centered on foundries by 2030, now faces fierce challenges again due to competitors' expanded investments and alliance movements.

Signal for 30% US Semiconductor Market Share Expansion?
Boosting Biden Administration's 'Supply Chain Restructuring' Plan

If Intel's acquisition of GlobalFoundries is successful, it could strengthen the Biden administration's plan to reorganize the global semiconductor supply chain centered on the United States. Pat Gelsinger, Intel's CEO, recently argued in an op-ed for the US daily 'Politico' that "government support for US companies should be expanded to strengthen semiconductor production leadership and foster the related ecosystem." Intel's consideration of acquiring GlobalFoundries can be seen as part of this viewpoint.

Since declaring Intel's entry into the foundry business in March, he has predicted competition by stating that "the US's global semiconductor production share will expand to over 30%." According to market research firm TrendForce, as of the first quarter of this year, GlobalFoundries ranked 4th in the global foundry market with a 5% share, alongside SMIC, following TSMC (55%), Samsung Electronics (17%), and UMC (7%). Although there are quarterly fluctuations, GlobalFoundries and UMC form the 3rd to 4th tier.

Previously, Intel announced plans to invest $20 billion (approximately 23 trillion KRW) to build two new fabs (factories) in Arizona, USA, but actual operation is expected only after 2024. The foundry business's core lies in quickly building infrastructure and attracting customers faster than competitors. Considering this, acquiring a market-ready company is seen as a strategic choice. Ki-hyun Ahn, Executive Director of the Korea Semiconductor Industry Association, evaluated, "Intel declared its entry into the foundry business but cannot do it internally immediately, so it uses GlobalFoundries, and from GlobalFoundries' perspective, Intel's funds provide investment capacity, aligning their interests."

TSMC, the number one foundry based in Taiwan, is expanding its footprint by investing not only in the US but also in China and Japan, so Intel must accelerate its efforts. TSMC has already committed $12 billion (approximately 13 trillion KRW) to build six semiconductor factories in Arizona, USA, and plans to invest $2.8 billion (approximately 3.2 trillion KRW) to expand its Nanjing factory in China.

Samsung Electronics Building, Seocho-gu, Seoul [Image source=Yonhap News]

Samsung Electronics Pressured from Above and Below
Facing Challenges from Competitors' Alliances
Market Calls for 'Meaningful M&A'

With the anticipated tectonic shifts in the foundry industry, the concerns of Samsung Electronics, ranked second, have grown. While the market share gap with TSMC remains unchanged, latecomers are expanding their business capabilities. Samsung's direct competitor is TSMC, but if Intel, backed by strong US government support and pouring in manpower and resources, succeeds in the acquisition and enters the market share rankings, Samsung will inevitably feel pressured. The 3rd-ranked UMC and joint 4th-ranked SMIC also receive active support from the Taiwanese and Chinese governments, respectively. Samsung is closely monitoring this news.

The market suggests that Samsung Electronics needs 'meaningful mergers and acquisitions (M&A)' to further strengthen its foundry competitiveness. While memory semiconductors are rapidly growing riding a supercycle, the foundry business's growth is somewhat slower, prompting a need for change. Samsung is investing 171 trillion KRW in system semiconductors by 2030 to expand its foundry market share, but it is not easy. Although Samsung has established a position based on advanced processes in the foundry market, TSMC, which holds more than half of the market share, is also investing heavily in technology development and moving swiftly.

Samsung plans to invest $17 billion (approximately 19 trillion KRW) to build factories in the US, but negotiations over incentives and other matters are ongoing, so selecting a location is expected to take some time. The absence of a group leader is also a negative factor affecting Samsung's large-scale investment decisions.

However, in the semiconductor industry where technology is crucial, only TSMC and Samsung Electronics can operate processes below 7nm (1nm is one-billionth of a meter), so it is evaluated that it will not be easy for lower-tier companies to catch up quickly. GlobalFoundries focuses on 12nm and 14nm processes, and Intel's technology is inferior to competitor AMD's, so even if Intel acquires GlobalFoundries, it is likely to compete with UMC and SMIC, which rank 3rd to 4th in market share. An industry insider said, "From a long-term perspective, we need to observe future developments."

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