Samsung Foundry Flooded with AI and Big Tech Orders... Begins "Selective Order Taking" for New Customers

Samsung Electronics' foundry division has been found to have entered "allocation," a system in which production volume is distributed by customer across certain processes. As demand surges amid the expansion of the artificial intelligence (AI) chip market and rising orders from global big tech firms, the division appears to be pursuing a "selection and concentration" strategy that accepts new customer orders only on a limited basis.
According to the industry on the 2nd, Samsung Electronics' foundry division has recently been adjusting its supply priorities by allocating volume to existing customers first and taking on new customers selectively. This shift in supply and demand is also being detected among the major domestic design houses (DSPs) that make up the Samsung Foundry ecosystem.
A design house industry official said, "Starting this year, allocation has been applied [to Samsung Foundry processes]," adding, "Rather than unconditionally accepting every customer order, the mood is one of selection and concentration centered on solid projects."
◇ Some Processes Tight on Supply Amid Expanding AI Chip Demand
Within the industry, there is analysis that the explosive growth of the AI market is fundamentally changing the structure of foundry demand. The explanation is that advanced process demand, once centered on smartphone application processors (APs), has recently shifted toward AI accelerators, application specific integrated circuits (ASICs), and high performance computing (HPC) chips, and that orders from global big tech companies are pouring in.
In fact, Samsung Foundry produces Tesla's autonomous driving chips and the AI inference chips of AI startup Groq, among others, and is also expanding cooperation with global AI companies such as NVIDIA and Google. The industry analyzed that this kind of global big tech demand is tightening supply and demand for some processes.
In particular, Samsung Foundry's 4 nanometer (nm) process is known to be mostly sold out through next year's volume, and some 8 nanometer processes are also reported to be operating at what is effectively full capacity.
Accordingly, analysis has also emerged that, in order to maximize the production efficiency of fabs that have reached the limits of their utilization, the order taking strategy is being reorganized around large customer projects with high production line operating efficiency.
Indeed, in terms of foundry plant operations, the assessment is that "small variety, large volume production," which concentrates on manufacturing a small number of large projects, is more advantageous for fab efficiency and profitability than "large variety, small volume production," which mass produces many types of products.
Another industry official explained, "From the plant's standpoint, concentrating production on a few large projects is far more efficient operationally than mass producing many types of products."
◇ Benefiting from TSMC Supply Shortage... Absorbing Supply Chain Diversification Demand
The industry believes that the advanced process supply shortage at Taiwan's TSMC, the world's number one foundry, and the resulting big tech demand for supply chain diversification (multi foundry) have influenced the rise in Samsung Foundry's utilization rate.
The explanation is that customers who once left Samsung for TSMC over issues such as yield are increasingly reconsidering Samsung Foundry or adopting it as a second source (an alternative supplier) in order to spread supply chain risk and strengthen their chip pricing leverage.
There is also an assessment that, buoyed by this expanding demand, Samsung's market position has risen to the point where it can raise supply prices for some processes by around 15 to 20 percent.
In the market, the mood is one of interpreting this as a recovery signal for Samsung Electronics' foundry division, which has suffered a prolonged slump and losses. Securities analysts are projecting that, on the back of expanding AI chip demand, rising utilization, and the effect of large customer orders, the Samsung Foundry division could succeed in turning a profit in the second half of this year or next year.
That said, there is also an assessment that, since the rise in utilization is concentrated on certain specific nodes, further observation is needed to determine whether this will translate into an improvement in the division's overall profitability, given factors such as the burden of large scale depreciation costs.