Samsung with Foundry Wings, Non-Memory Quarterly Operating Profit Enters 1 Trillion Won Era

Foundry Price, Volume, and Cost Improve Together
Non-memory Quarterly Operating Profit Nears 1 Trillion Won as Early as 4Q
Price Hikes, Yield Improvements, and US Plant Expansion Drive Supply Growth
Additional Profitability Expected with HPC Chip Orders

[Asia Economy Reporter Suyeon Woo] Recently, fueled by intensified foundry supply shortages, price hikes, and process yield improvements, there is a forecast that Samsung Electronics' non-memory business division could see quarterly operating profits reach 1 trillion won as early as the end of this year. This analysis comes amid growing concerns over a slowdown in the memory semiconductor market toward year-end, with the foundry-focused non-memory business expected to lead Samsung Electronics' next-generation semiconductor growth.

According to industry sources on the 23rd, Samsung Electronics' non-memory business division (System LSI and Foundry) is accelerating yield improvements and capacity expansions with a goal of achieving 1 trillion won in quarterly operating profit. Last year, operating profits fluctuated between 170 billion and 430 billion won per quarter, and in the first quarter of this year, the suspension of operations at the Austin foundry plant in the U.S. resulted in a loss of around 200 billion won. From the second quarter onward, recovery was observed with operating profits reaching approximately 280 billion won. Securities firms expect that as foundry improvements become more pronounced toward the end of the year, the '1 trillion won quarterly target' could be approached as early as Q4 this year, or at the latest, next year.

This outlook is thanks to simultaneous improvements in foundry market pricing, volume, and cost. With these three factors aligned for market improvement, significant performance gains are expected from the second half of this year onward. In the latter half of this year, Samsung Electronics implemented a 10-15% price increase for the first time since starting its foundry business. Competitor TSMC announced plans for up to a 20% price increase, leading to expectations that Samsung Electronics may also raise prices by up to 20% in the future.

Alongside foundry price hikes, companies are actively pursuing capacity expansions to increase production capabilities. In the foundry industry, where customer orders are essential, decisions for large-scale expansions indicate secured orders. Samsung Electronics is currently finalizing candidate sites for a 20 trillion won foundry plant expansion in the U.S., with mass production expected as early as the second half of 2024. Considering that the investment scale for equipment and infrastructure is about 3.5 trillion won per 10,000 wafers for the 5nm process, the 20 trillion won U.S. plant expansion is expected to increase capacity by approximately 60,000 wafers. Additionally, partial utilization of the Pyeongtaek Plant 3, scheduled to start operations in 2023, is expected to double the supply expansion effect.

Cost reduction through securing technological capabilities and yield improvements also supports the foundry boom outlook. Samsung Electronics' 5nm process production yield in the second half of this year is rising more than twice as fast compared to the beginning of the year. Starting from the end of this year, the introduction of the 4nm process will increase the proportion of advanced processes, and from the 3nm process, Samsung plans to be the world’s first to adopt GAA (Gate-All-Around) technology, significantly widening the gap with competitors.

Furthermore, with the expansion of 5G smartphone adoption boosting mobile AP orders, and if product production expands into the HPC (High-Performance Computing) chip market, additional profitability can be expected. Samsung Securities researcher Minseong Hwang said, "Future HPC customer orders are expected to have unit prices at least 50% higher than existing mobile orders," adding, "Along with capacity expansion, this will act as a positive factor for Samsung Electronics."

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