Samsung’s model is in every single place. From Galaxy telephones and good TVs to washing machines and fridges, the corporate says its merchandise will be present in practically three-quarters of U.S. households.
However Samsung is way more than devices and home equipment, and there is one more reason why it is one of many world’s most beneficial corporations. It is the second-biggest maker of chips which might be powering so many widespread units.
For greater than three a long time, Samsung has been a pacesetter in reminiscence chips, that are used for digital knowledge storage. However that is been a market in turmoil. Over the past yr, costs for reminiscence chips have taken a dive, and so they’re anticipated to fall as much as 23% extra within the present quarter. In April, Samsung reported dismal earnings for the primary quarter, with revenue plunging to its lowest stage since 2009.
Samsung responded by chopping manufacturing of reminiscence chips. Elsewhere within the {industry}, smaller rival Micron stated not too long ago that it expects to slash 15% of its workforce.
Amid the wreckage, the large firm has discovered development in one other nook of the semiconductor market, doubling down on its foundry enterprise, the facet that makes customized chips for enormous prospects like Qualcomm, Tesla, Intel and Sony, in addition to 1000’s of smaller gamers.
Samsung is constructing a $17 billion chip fabrication plant, or fab, in Taylor, Texas, the place it is promised to start out the primary U.S. manufacturing of superior chips subsequent yr. In February, purposes opened for corporations like Samsung to get their reduce of the $52.7 billion CHIPS and Science Act, handed by lawmakers final yr with the purpose of bringing chip manufacturing to the U.S. after 30 years of market share losses to Asia.
Samsung can be including capability in its house nation of South Korea, spending $228 billion on a mega cluster of 5 new fabs which might be scheduled to come back on-line by 2042.
“They’re spending and spending and spending,” stated Dylan Patel of analysis and consulting agency SemiAnalysis. “And why is that? To allow them to make amends for know-how, to allow them to proceed to keep up their management place.”
Samsung’s $17 billion new chip fab is underneath development in Taylor, Texas, on April 19, 2023.
Katie Brigham
‘We don’t settle’
Samsung is certainly one of solely three corporations that manufacture the world’s most superior chips, rating second behind Taiwan Semiconductor Manufacturing Firm and forward of Intel.
Now Samsung is setting its sights on catching TSMC.
“We don’t settle to be No. 2,” stated Jon Taylor, Samsung’s company vp of fab engineering, in an interview. “Samsung is rarely glad with No. 2 as a enterprise, as an organization. We’re very aggressive.”
The corporate introduced an formidable new highway map in October, pursuing a aim to triple capability of modern manufacturing, and to make industry-leading 2-nanometer chips by 2025 and get them right down to 1.4-nanometer by 2027.
“If Samsung hits their targets, they will leapfrog forward of TSMC, however that is an enormous if,” Patel stated. “TSMC is the one one which the {industry} trusts to hit their highway map.”
CNBC not too long ago went inside Samsung’s Austin chip fab, for the primary in-depth tour given on digicam to a U.S. journalist. Whereas there, we received a uncommon interview with the top of Samsung’s U.S. chip enterprise, Jinman Han.
A 34-year veteran of the corporate, Han’s U.S. oversight contains the foundry operations and the reminiscence chips enterprise.
“We actually need to be a bedrock for U.S. {industry},” Han informed CNBC.
Samsung received its begin in 1938 because the Samsung Sanghoe Buying and selling Firm, based by Lee Byung-chull in Korea.
Samsung
Samsung received its begin 85 years in the past, when founder Lee Byung-chull created it as a buying and selling firm for exporting fruit, greens and fish in Korea.
“His imaginative and prescient was for our firm to be everlasting, sturdy and highly effective,” Han stated. “So, he selected the title Samsung, which accurately means three stars.”
To outlive two main wars, the corporate diversified into industries like textiles and retail. Samsung Electronics was established in 1969, the first Samsung TV got here out in 1972, and two years after that Samsung purchased Hankook Semiconductor in a daring effort to determine the vertically built-in client electronics large the corporate is at the moment.
Samsung opened its first U.S. places of work in New Jersey in 1978. By 1983, it was making 64KB dynamic random-access reminiscence (DRAM) chips, which had been generally utilized in computer systems, and the corporate had a brand new U.S. workplace in Silicon Valley.
Lee Kun-hee took over after his father’s dying in 1987, and Samsung’s first cell phone got here a yr later. And now Samsung is the world’s largest smartphone supplier, going head-to-head with Apple.
Only a decade after making its first reminiscence chip, Samsung was coming to market with a model that had 1,000 occasions the capability. It gained worldwide acclaim in 1992 with the world’s first 64MB DRAM chip, inserting the corporate squarely in first place in reminiscence, the place it stays at the moment.
“Its presence is so ubiquitous in South Korea that they name their nation the Republic of Samsung,” stated Geoffrey Cain, creator of the e-book “Samsung Rising,” printed in 2020.
Samsung began making chips within the U.S. with its fab in Austin, Texas, which broke floor in 1996. It opened a second fab within the Texas capital metropolis in 2007. Right now, Samsung’s Austin operation is solely dedicated to foundry.
Samsung staff within the cleanroom of the corporate’s Austin chip fab on April 19, 2023.
Samsung
Samsung’s growth has introduced with it some authorized battle.
In 2018, the corporate lastly ended a seven-year authorized battle with Apple over whether or not Samsung copied the iPhone. Phrases weren’t disclosed.
“Apple received a cost from Samsung, so Apple technically received,” Cain stated. “However while you add up all of the authorized prices, all of the combating, all these years, it was only a impartial zero on zero for either side.”
Challenges have not been restricted to the courtroom.
In South Korea, protests have erupted round Jay Y. Lee, the third technology of Samsung’s founding household to take the helm. He served time in jail for bribery earlier than being pardoned in August and turning into government chairman in October.
And throughout the pandemic, Samsung was harm by the worldwide chip scarcity as demand peaked and the provision chain was disrupted.
“It was actually painful,” Han stated. “While you take a look at your prospects asking for extra chips, however there isn’t any means you may present that, it was so painful.”
That dynamic is altering. As shoppers rein of their spending within the face of rising inflation, demand for reminiscence chips has weakened sharply. Han stated Samsung’s inside knowledge evaluation reveals “the market will rebound probably by finish of this yr.”
Geopolitical tug of struggle
Traders have already been coming again. The inventory dropped virtually 30% final yr, alongside a broader decline within the world tech {industry}. The shares are up 28% this yr and hit a 52-week excessive on June 5, on the Korea Inventory Trade. Morgan Stanley not too long ago named it a prime choose.
A part of the rally might mirror the newest chapter within the geopolitical chip struggle between China and the U.S.
In Might, China banned merchandise from U.S. reminiscence maker Micron, which led to a inventory pop for Samsung. The U.S. additionally granted Samsung a one-year waiver to function its two chip fabs in China, regardless of new guidelines in October that cease many chip corporations from exporting their most superior know-how to the world’s second-biggest financial system.
Samsung says it is including capability in Taylor, Texas, which is northeast of Austin, due to U.S. demand. Greater than 90% of superior chips are at present made in Taiwan.
“Bringing Taylor on board is simply going to extend their skill to supply their chips domestically and never have to enter areas of the world the place they could have some discomfort,” stated Samsung’s Jon Taylor.
Over the past three a long time, the U.S. share of world chip manufacturing has plummeted from 37% to only 12%. That is largely as a result of estimates present it prices at the very least 20% extra to construct and function a brand new fab within the U.S. than in Asia, the place labor is cheaper, the provision chain is extra accessible and authorities incentives are far better.
South Korean President Yoon Suk-yeol appears to be like on as U.S. President Joe Biden delivers remarks throughout a go to to a semiconductor manufacturing facility on the Samsung Electronics Pyeongtaek Campus in Pyeongtaek, South Korea, Might 20, 2022.
Jonathan Ernst | Reuters
Energy and water
For Samsung’s Texas growth, environmental issues are massive and rising.
The best-price items of kit Samsung will carry into Taylor are most likely the $200 million EUV lithography machines made by ASML. They’re the one units on the earth that may etch with sufficient precision for probably the most superior chips.
Every EUV machine is rated to eat about 1 megawatt of electrical energy, which is 10% greater than the earlier technology. One examine discovered Samsung used greater than 20% of South Korea’s complete photo voltaic and wind energy capability in 2020.
“Electrical energy is the lifeblood of a semiconductor fab in a way,” stated Patel of SemiAnalysis. “There have been a number of situations the place electrical energy has gone out and firms have needed to scrap months of manufacturing.”
Texas’ power grid is basically reduce off from its neighbors, limiting its borrowing energy throughout state traces. In 2021, that grid failed throughout an excessive winter storm, leaving hundreds of thousands of Texans with out energy and inflicting at the very least 57 deaths.
“I already signed 12 legal guidelines to make the facility grid extra dependable, extra resilient and safer,” Texas Republican Gov. Greg Abbott informed CNBC in April. “And so we will undoubtedly guarantee any enterprise transferring right here they may have entry to the facility they want, but additionally at a low value.”
Water is one other main want for chip fabs. In 2021, Samsung used about 38 billion gallons of water to make its chips. Roughly 80% of Texas stays tormented by drought.
“Now we have the Texas Water Board that is engaged on that and laws that we’re engaged on this session to be sure that with a rising inhabitants in Texas, we can present for the water wants, not simply of companies, but additionally for our rising inhabitants,” Abbott stated.
Samsung informed CNBC its aim in Austin is to reuse greater than 1 billion gallons of water in 2023. On the new Taylor fab, it goals to reclaim greater than 75% of the water used.
Of late, all of the hype in know-how has been round synthetic intelligence fashions to energy providers like OpenAI’s ChatGPT. These purposes require much more highly effective processors, made primarily as of now by Nvidia.
“There are increasingly folks around the globe who could make reminiscence chips,” Cain stated. “To remain forward of the sport, you have to get into the newer logic applied sciences.”
Cain stated he sees Samsung “diving deeper into the logic chip phase. So, [that’s] the AI chips, the longer term purposes for semiconductor know-how.”
When requested about what’s subsequent, Samsung’s Taylor stated the corporate ultimately plans so as to add extra chip manufacturing capability at its 1,200-acre website in Texas.
“We at present simply have one fab introduced there,” he stated. “However loads of room for extra.”
Watch the video to go behind the scenes at Samsung’s Austin chip fab and the constructing challenge in Taylor, Texas.
