There is only one company operating at the forefront of semiconductor manufacturing and that is TSMC. Many will read that and think “Of course, that’s obvious”, but we mean it in a very specific way (many more will read it and then go back to swiping videos on TikTok, so thanks for sticking around…).
For the past few years, there have actually been two companies operating at the forefront: TSMC and Samsung. With all the attention TSMC receives for commercial and geopolitical reasons, we found that many people forgot about Samsung. A few years ago that would be a mistake, Samsung was always competitive with TSMC, albeit a bit slower and harder to work with. But it looks like that may change.
guest author jonathan goldberg is the founder of D2D Advisory, a cross-functional consulting firm. Jonathan has developed growth strategies and partnerships for companies in the mobile, networking, gaming, and software industries.
As usual, Dylan Patel has a good article on the Samsung problems. The quick summary of that article is that Samsung is facing delays in both its 7nm process and DRAM products. Reread some of Samsung’s press coverage over the past year, and it seems like something is seriously wrong there. delays False starts. Mixed messaging. For us, the most disturbing part of this is that this is a pattern that we have seen many times before. This is what all companies look like just before they break off the Moore’s Law curve.
To be clear, we’re not saying that Samsung is going to abandon the development of cutting-edge manufacturing capabilities. They have immense resources and knowledge. They have to keep moving forward. But that doesn’t mean you have to structure your business the same way.
More specifically, we’ve heard some people argue that Samsung should get out of the foundry business, stop making chips for others, and instead focus solely on its highly profitable memory business. We know there are people within Samsung who argue this, but we have no way of measuring how influential they will ultimately be.
That’s why it’s so important to remember Samsung in foundry discussions. They have provided an alternative to TSMC for years, but there is a non-zero probability that they no longer provide that alternative. Again, we’re not saying this is going to happen, but in all of our discussions of supply chain resilience, it’s important to remember that things could get worse.
What would that look like?
Here the answer depends a lot on which client we are talking about. Many of the larger chip companies, notably Nvidia and AMD, have long ago moved away from Samsung for the most part and into TSMC.
They made huge order commitments, a process that is now haunting their bottom line. At the other end of the spectrum, almost every small startup chip company we know of has never considered working with anyone other than TSMC for the cutting edge.
Samsung’s foundry business is not easy to work for small businesses, customer service is not its main selling point. Those companies already live in a world where TSMC is the only option, and they’re paying full price for it, with another 20% increase coming soon. That leaves a big group in the middle, Samsung’s foundry reportedly has more than 100 clients, of which Qualcomm is the largest. Although most of those companies are likely to work with TSMC as well, losing Samsung as a foundry would cause a lot of pain. This would likely mean product delays and significant cost increases, also known as disruption.
None of this is set in stone. Much could change. Samsung could make the organizational changes it needs to get its manufacturing process improvements off the ground. They could get subsidies from the Korean and US governments to “encourage” their stay.
Later on, Intel could possibly change its manufacturing and then figure out customer service. But after two years in which everyone is constantly shocked to discover just how fragile the semis supply chain is, now is a good time for the industry to start doing scenario analysis and contingency planning.