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Thu, March 30, 2023 | 17:35
Samsung considers partnering with Chinese companies in semiconductors
Posted : 2016-05-06 17:28
Updated : 2016-05-06 17:51
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Samsung Electronics employees work at the company's chip fabrication line in Korea in this file photo. / Korea Times file
Samsung Electronics employees work at the company's chip fabrication line in Korea in this file photo. / Korea Times file

By Kim Yoo-chul

Samsung Electronics is considering partnering with leading Chinese semiconductor companies to increase its sales and market share in the less-volatile and more profitable logic-chip business.

The world's biggest memory chip maker wants to sharpen its technological prowess to move away from heavy dependence on conventional memory chips, which have been commoditized because of massive capacity expansion by Chinese manufacturers.

"China is a land of opportunity; however, it is also a real threat for Samsung," an official who is familiar with the matter told The Korea Times, Friday. "It's no surprise that Samsung Electronics wants to form strategic partnerships with Chinese companies focusing on logic chips. Working-level discussions are under way."

The Chinese market is valued at $150 billion to $170 billion for semiconductor chips annually, accounting for more than 40 to 50 percent of the world's total chip consumption.

But the scale of Samsung's chip business in China has not been that big compared with its international competitors.

China accounted for 15 percent of the total sales that Samsung generated last year, the lowest portion among the "top 9" list, according to data from Capital IQ.

Broadcom earned 60 percent of its sales last year from China, followed by Qualcomm, NXP, Texas Instruments and Micron Technology with 53 percent, 51 percent, 45 percent and 41 percent, respectively. China accounted for 24 percent of the total sales SK hynix in 2015.

"It seems doubtful that China's support for joint projects will allow Samsung Electronics and SK hynix to gain better access to the Chinese market; however, having strategic partnerships mean increased opportunities to raise the business," the official said.

Good bet

In a report, Friday, Bernstein Research said it believes that GlobalFoundries _ Samsung Electronics' business partner in logic chips _ is "discussing with China," because the firm has nothing to lose in the Chinese market.

"Samsung Electronics derives negligible sales from China, so what if Samsung offers to partner with a Chinese company, and maybe together with GlobalFoundries too? Hard to know how such a combination would happen as many details have to be worked out," Bernstein's senior analyst, Mark Li, said in the report.

In logic chips, used to control computing systems, unlike memory chips, which are mainly used to read and write the data in devices, Samsung competes with Taiwan's TSMC.

The foundries' workload is dictated by speedy technological change because the increased consumer appetite for digital devices means chips should be thinner yet do more and use less power.

TSMC is building advanced fabrication lines in the Chinese city of Nanjing; however, Li stressed that because TSMC is responsible for solely handling the spending for the build-up amid a desire from China to reduce its dependency on the Taiwanese firm, the situation may benefit Samsung.

"China has no equity stake," Li said. "We do know the competitive landscape could be very different should that come true."

Samsung Electronics has been consistent in converting lines to logic chips to expand the output of mobile processors. But its global share in the logic-chip business was fourth last year, said IC Insights, a market research firm.

"If Samsung ties up with Chinese companies for logic chips, then it could significantly boost its share in China with a diversified portfolio," the official said.

Samsung Electronics is the biggest foreign investor in China. It runs a massive memory chip fabrication line in Wuxi, while the company makes logic chips at its plants in Korea and Austin, Texas.

But Samsung does have an Achilles heel: it competes in some product areas such as mobile phones with potential foundry clients, raising the question of whether firms would feel comfortable handing over their technology to a rival.


Emailyckim@ktimes.com Article ListMore articles by this reporter
 
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