Bottom line: Samsung executives addressed investor questions about the future capabilities of its chip foundries during a recent earnings call. In essence, they are planning a large expansion, but it will require a correspondingly large investment paid by their customers. Samsung’s current manufacturing capacity was already sold to partners at standard prices before the chip shortage began, but as hardware designers experience growing demand, they will pay for Samsung’s new capacity at prices that reflect the current market.
Last quarter, Samsung invested KRW 12.5 trillion ($ 10.9 billion) in its foundry division. Ben Suh, company representative, told investors that “investments in foundry were focused on capacity expansions for advanced processes such as 5 nanometer EUV to respond to customer demand.”
Going forward, “Samsung’s foundry will accelerate growth by expanding the capacity of the Pyeongtaek S5 line and adjusting prices to allow for future investment cycles.” Pyeongtaek is one of Samsung’s most modern foundries and can produce second generation 5nm and first generation 4nm products.
“We will maximize our ability to supply chips by strengthening cooperation with leading foundry companies and flexibly adjust our product mix to prioritize high value-added productions,” Suh said.
Samsung is not the first foundry to raise its prices, although it has been the most open about it. TSMC has reportedly stopped offering long-term discounts to its customers, as was customary in the industry. UMC, another foundry, also raised some of its prices last year.
An increase in manufacturing costs can have a ripple effect on retail hardware prices. But in the long run, if profits are reinvested the way Samsung says they will be, next-gen hardware won’t be affected by the shortage.
In the meantime, however, Samsung doesn’t have any quick fixes. In the second half of the year, “we expect overall demand to outpace supply due to growing demand for accelerated 5G penetration, the continuation of the work-from-home trend, and increasing demand for safety stocks from customers,” Shawn Tan from Samsung. saying.
Image Credit: Kote Port, Laura ockel