Why Qualcomm Picked TSMC Over Samsung For Its Latest Chips
Trefis has a $2,025 price estimate for Samsung, which is around 10% below the current market price.
Samsung’s 7-nm Delay Likely Contributed To Shift
The nanometer measurement, which is a key metric in the semiconductor fabrication business, is an indicator of the space between transistors on a chip. Reducing the distance typically leads to a better computing performance, lower power consumption, and miniaturization. However, the smaller the size, the more challenging and expensive the chips generally are to develop and deploy. While both Samsung and TSMC have been working on a 7nm process node meant to serve as a foundation for the next generation of processors, Qualcomm reportedly decided to drop Samsung’s foundry as it wasn’t able to deliver a commercially feasible 7nm solution during 2018. Unlike TSMC which intends to produce its 7nm chips in a staggered manner, starting with a basic 7nm chip, and eventually moving to the more advanced 7nm plus chips that use a process called extreme ultraviolet lithography, Samsung is reportedly transitioning directly to the plus chips, resulting in delays. That said, Samsung could eventually win back some of the orders in 2019, when its process is ready as it usually equips its flagship smartphones with Qualcomm chipsets.
Why The Foundry Business Is Important To Samsung
More than 75% of Samsung’s semiconductor revenues and profits come from its memory operations. However, the company has been betting on tripling the size of the foundry business in the next five years, as it looks to diversify away from the memory market, which is fairly cyclical and volatile. Moreover, the rise of computing power intensive applications such as machine learning and AI is likely to drive demand growth for logic chips. Samsung held just about a 7.7% share of the foundry market over 2017, compared to TSMC which leads the market with a 56% share. Samsung is looking to boost its market share to 25% by 2022. Samsung has been investing significantly in the business, with CapEx expected to stand at about $5 billion this year, compared to TSMC which is expected to spend about $11 billion.
View Interactive Institutional Research (Powered by Trefis):
">Qualcomm is expected to move some of its chip production orders away from Samsung Electronics to Taiwan’s TSMC next year, according to a report from Nikkei. The wireless and semiconductor behemoth will reportedly bank on TSMC to produce some modem chip and core processors next year, while also engaging TSMC’s services for its next flagship processor, the Snapdragon 855, which is expected to debut in late 2018. The move could be viewed as a setback of sorts for Samsung’s foundry operation, which produces Qualcomm’s Snapdragon 835 and recently announced the flagship Snapdragon 845 using its 10nm technology.
Trefis has a $2,025 price estimate for Samsung, which is around 10% below the current market price.
Samsung’s 7-nm Delay Likely Contributed To Shift
The nanometer measurement, which is a key metric in the semiconductor fabrication business, is an indicator of the space between transistors on a chip. Reducing the distance typically leads to a better computing performance, lower power consumption, and miniaturization. However, the smaller the size, the more challenging and expensive the chips generally are to develop and deploy. While both Samsung and TSMC have been working on a 7nm process node meant to serve as a foundation for the next generation of processors, Qualcomm reportedly decided to drop Samsung’s foundry as it wasn’t able to deliver a commercially feasible 7nm solution during 2018. Unlike TSMC which intends to produce its 7nm chips in a staggered manner, starting with a basic 7nm chip, and eventually moving to the more advanced 7nm plus chips that use a process called extreme ultraviolet lithography, Samsung is reportedly transitioning directly to the plus chips, resulting in delays. That said, Samsung could eventually win back some of the orders in 2019, when its process is ready as it usually equips its flagship smartphones with Qualcomm chipsets.
Why The Foundry Business Is Important To Samsung
More than 75% of Samsung’s semiconductor revenues and profits come from its memory operations. However, the company has been betting on tripling the size of the foundry business in the next five years, as it looks to diversify away from the memory market, which is fairly cyclical and volatile. Moreover, the rise of computing power intensive applications such as machine learning and AI is likely to drive demand growth for logic chips. Samsung held just about a 7.7% share of the foundry market over 2017, compared to TSMC which leads the market with a 56% share. Samsung is looking to boost its market share to 25% by 2022. Samsung has been investing significantly in the business, with CapEx expected to stand at about $5 billion this year, compared to TSMC which is expected to spend about $11 billion.
View Interactive Institutional Research (Powered by Trefis):
Post a Comment