10-04-2011 14:51
Samsung's semiconductor biz looking up
A patent row between Samsung Electronics and Apple is ironically a favorable opportunity for the Korean chip giant to sharpen its edge in profitability in the advanced non-memory chip business.
``Samsung aims to reap at least $1.5 billion in revenue from our foundry business by 2015, up from last year’s some $400 million,’’ said a high-ranking Samsung executive, Tuesday.
Samsung is targeting an annualized 30 percent growth in its foundry business over the next four years.
Its foundry business is well categorized as part of the non-memory business.
The logic looks quite simple. A chipmaker just manufactures chips with the specifications outlined by a client. That business requires refined chip manufacturing technologies and is also labor-intensive.
Officials at Samsung’s chip sector don’t doubt that further expansion of its foundry business is a top priority and one Samsung source said that the company has set the ``fab-light’’ strategy as the industry’s new outlook, fueling optimism that its foundry service will strengthen.
Samsung Electronics extends the foundry service to Xilinx, Qualcomm, Toshiba as well as Apple, according to Samsung officials.
``The key point is that Samsung should overcome the chip industry’s cyclical ups and downs for corporate sustainability. The foundry business will become our new growth engine,’’ said Kwon Oh-hyun, the chief of the company’s device solutions division, in a recent meeting with reporters.
``Samsung was not initially active in the foundry business. But we’ve been continuously developing it since 2005 when Samsung entered the sector,’’ the semiconductor head said, expecting ``foundry pitches’’ to soon yield high returns.
As for the necessary technology, Samsung’s chip plant in Austin, Texas, has recently fully converted its production line to NAND flashes with large-sized 12-inch wafers, according to data obtained by The Korea Times.
The plant in Texas plans to adopt a finer 27-nanometer chip-making processing technology for flash memories from 35- to 32-nanometers and it’s been set to expand the foundry business in order to meet rising demand for such products, according to data from Gartner, a leading market research firm.
No backlash in patent woes
Apple and Samsung have been involved in a heavy legal battle over patent infringement claims this year.
Apple is known to have dropped Samsung in favor of Taiwan Semiconductor Manufacturing Company (TSMC) for the next version of its custom design mobile processors used in its popular i-branded products.
But Samsung insiders and industry officials expect the switch will be ``short-lived’’ because Samsung has a proven roadmap in chip-making technologies and a reliable output commitment.
Samsung Austin Semiconductor (SAS) in Texas, tasked to handle mobile application processors (APs) for Apple, has an annual production capacity of 65,000 sheets, the latest Gartner report showed.
``Samsung is better positioned to clearly commit production volumes at reasonable prices because it has proven chip-making technologies. It is very unlikely for Apple to switch client basis suddenly, just because of patent diputes,’’ said another Samsung executive familiar with the matter.
``The Apple-Samsung fight is a totally different matter. We are reliable and trustable chip supplier to Apple. Apple knows that,’’ the executive added.
The so-called ``A6 mobile AP’’ will be used in advanced iPhones and iPads, which Apple plans to introduce next year. Analysts believe that Samsung already makes its predecessor, the A5, in Austin.
``Apple will stick with Samsung and its Austin factory to make A5 mobile chips rather than opt for rival supplier TSMC. Because TSMC's manufacturing process hasn’t gelled, the risk of going with it is too high,’’ said Ashok Kumar of Rodman & Renshaw in a note to clients.
``No other foundry can match Samsung’s capacity commitment, process road map and pricing,’’ Kumar claimed.
Steve Park, a senior Apple representative, declined to comment, as did Samsung Electronics spokesman Ken Noh.
Samsung plans to spend 4 trillion won for non-memories that include the foundry business and mobile APs, while 6.3 trillion won has been set aside for its traditionally-strong memory chip business, Samsung said.
Apple is going to buy over 8 trillion won or $7 billion worth of computer memory chips this year from its South Korean frenemy, enough to rank as Samsung’s biggest overseas client by the end of 2011.
As well as mobile APs, Apple buys large quantities of memory chips from Samsung for almost all its i-products.
