Samsung on high alert over Intel's foundry investments

The Korea Times

The Korea Times

Business

Wed, December 6, 2023 | 14:14

Tech

Samsung on high alert over Intel's foundry investments

Posted : 2021-03-24 16:48

Updated : 2021-03-25 08:16

From left, TSMC Chairman Mark Liu, Samsung Electronics Vice Chairman Lee Jae-yong and Intel CEO Pat Gelsinger / Courtesy of the companies

By Baek Byung-yeul

Semiconductor behemoth Intel announced a $20 billion investment plan on Wednesday (KST) to build two new chip-manufacturing factories in the U.S. state of Arizona and open up its plants to outside customers.

Sharing the company's new vision called IDM 2.0, a new version of its integrated device manufacturing (IDM) model, Intel CEO Pat Gelsinger said the company will use the strategy to "design the best products and manufacture them in the best way possible for every category we compete in." To catch up to the leaders in the foundry business, Intel also revealed its plan to develop thinner 7-nanometer chips, using extreme ultra violet (EUV) processing technology.

The move apparently aims to reduce the U.S.'s heavy reliance on chip making firms in Asian countries. It is also in line with the Joe Biden administration's pledge to boost the local chip supply chain as semiconductors have been increasingly regarded as a strategic product.

When calculating pros and cons, Intel's decision to kick off the foundry business could become both a threat to and opportunity for Samsung Electronics, according to industry officials and analysts, as Intel's broad range of clients could pose a negative impact to the Korean tech giant, which has been desperate to expand the customer base of its contract-based foundry business.

But Intel's announcement could also be a boon for Samsung's foundry business as the two can expand the scope of cooperation in the chip-manufacturing business. During the online conference, Intel ensured that it will expand the use of third-party foundry capacity.

"Intel expects to build on its existing relationships with third-party foundries, which today manufacture a range of Intel technology ― from communications and connectivity to graphics and chipsets," the company said.

Intel's chip-manufacturing factory in Arizona / Courtesy of Intel

Industry analysts said the U.S. is implementing two strategies in order to protect the supply chain of local chip industry ― supporting U.S. chip makers to build new factories there and asking overseas companies to establish new factories in the U.S.

As seen in the current memory chip industry, which is controlled by the big three companies ― Samsung, SK hynix and Micron ― in the long run the foundry business will be dominated by TSMC of Taiwan, Samsung and Intel.

The U.S. has already asked the two leading foundry makers ― TSMC of Taiwan and Samsung ― to build new plants there. In response, TSMC already unveiled plans in 2020 to build a $12 billion chip plant in Arizona this year and Samsung is mulling over possible sites for its new chip-making factories.

Kim Young-woo, an analyst at SK Securities, said the U.S. and Europe will increasingly try to provide incentives to Samsung and TSMC as having their new plants in their countries is the most efficient way of reducing their reliance on Asian countries.

"When considering technology barrier in the high-end foundry sector, chances are slim that new comers will appear as strong players in the foundry business," the analyst said. "At the moment, Intel has the leading capability in terms of manufacturing chips among the U.S. foundry companies. So Intel is likely to receive subsidies from the U.S. states or tax benefits where its plants are located."

Intel's announcement will also work as an opportunity for Korean firms making materials and equipment for chip-manufacturing as they will be able to gain new customers to sell their products to.

After the announcement, firms working with Intel here saw their stocks rising. Stock prices of Eugene Tech and Intek Plus, which provide semiconductor equipment to Intel, rose by 9 percent to 45,400 won and 6.46 percent to 26,350 won, respectively.

baekby@koreatimes.co.kr