Samsung Electronics Co. has secured a deal to manufacture Qualcomm Technologies Inc.’s new mobile application processors for 5G smartphones, the latest in a series of high-profile deals for its chip-making business.
Sources said on Sept. 13 that the deal, estimated at close to 1 trillion won ($844 million), marks the first time Samsung has clinched an order to produce all of Qualcomm’s newest chips. Currently, the Korean tech giant makes several 5G chipsets for Qualcomm, using its 8-nanometer process.
According to the semiconductor industry, Samsung will make the 5G chipsets, known as the Snapdragon 875, using its cutting-edge 5-nanometer technology. Qualcomm’s latest processor, set to be rolled out in December, will be used in high-end 5G smartphones made by Samsung and Chinese handset-makers Xiaomi and Oppo.
Industry watchers said the contract is significant in that Samsung beat market leader Taiwan Semiconductor Manufacturing Co. (TSMC) to win the order, signaling Samsung’s technological prowess and price competitiveness. Samsung and TSMC are the only chipmakers able to mass-produce chips with 5 nm technology.
The deal follows other huge chip supply agreements Samsung has secured from other big-name players in recent weeks.
Earlier this month, Samsung has clinched a deal to fabricate Nvidia Corp.’s new RTX 30 series gaming processing chips, using its 8 nm chipmaking process node. Last month, the company said it is manufacturing IBM’s POWER10 Processor, using its 7 nm technology.
Samsung is also known to be in negotiations to make advanced chips for Intel Corp. as the Korean company aims to boost its presence in the global foundry business.
Analysts said the deal is expected to give Samsung the momentum needed to narrow the gap with TSMC.
In recent years, Samsung Vice Chairman Jay Y. Lee has repeatedly shown his dedication to the system semiconductor business. The global chipmaker was a latecomer to the foundry industry and did not have an extensive relationship with existing global fabless companies, compared to frontrunner TSMC.
In April 2019, Lee said that the company would inject 133 trillion won ($112 billion) into its system semiconductor operations to become the world leader in both the memory and system chip businesses.
According to market researcher TrendForce, Samsung had a 17.4% market share in the global foundry industry in the third quarter of the year, following TSMC’s 53.9%. The foundry industry posted a combined revenue of $57.2 billion in the January-September period of this year. TrendForce expects the market size to exceed last year’ s $65.5 billion by the end of this year.
SAMSUNG SET TO BENEFIT FROM US SANCTIONS ON CHINA
Analysts say Samsung is also poised to benefit from the US move to impose sanctions against Chinese companies.
According to a Sept. 7 Reuters report, the US Department of Defense might block American companies from providing goods and services to China’s biggest chipmaker Semiconductor Manufacturing International Corp. (SMIC). If that occurs, some of SMIC’s clients would choose Samsung as a replacement.
Samsung’s foundry business posted $12.77 billion (15.15 trillion won) in revenue in 2019 and is expected to reach a global market share of at least 20% by the first quarter of next year at the latest.
“We forecast Samsung’s foundry business to grow at least 50% next year,” said Doh Hyun-woo, an analyst at NH Investment & Securities.
By Jeong-Soo Hwang
<Edited by In-Soo Nam>