Samsung Electronics is said to be cutting back on its semiconductor foundry operations, particularly focusing on its 4 nm, 5 nm, and 7 nm production lines due to low demand. This move follows substantial financial losses, which are estimated to be in the tens of billions of won for the third quarter of this year, as the company aims to lower expenses and optimize its operations.
Production Capacity Reduction
Industry sources indicate that Samsung has already decreased over 30% of its production capacity for the aforementioned process nodes on its Pyeongtaek campus. Plans are in place to raise this reduction to nearly 50% by year’s end.
Facing Losses in the Foundry
As reported by South Korean outlet ChosunMedia, the semiconductor sector has had difficulty securing enough mass production orders from significant tech players like Nvidia, AMD, and Qualcomm. This has resulted in a reported loss of 1 trillion won (about USD 724 million) in the last quarter. To cut costs, including electricity expenses, the company is choosing to power down production machines instead of keeping them idle.
This strategy reflects a larger trend in the industry, especially as lower-than-anticipated orders from Chinese fabless semiconductor firms have impacted the production levels in the 4 and 5 nm processes. Increased U.S. regulations on semiconductor exports to China have led these companies to postpone their projects, worsening conditions for Samsung’s foundry operations.
Concerns About Competitive Edge
Experts are cautioning that these closures may undermine Samsung’s competitive edge in the semiconductor arena. With Samsung reallocating resources to its memory division, which has been more lucrative historically, its foundry segment could lag behind competitors like TSMC. Professor Lee Jong-hwan from Sangmyung University warned that this gap could make it difficult for Samsung to catch up once market conditions improve.
Shift Towards Snapdragon Chips
In light of the challenges in the foundry sector, Samsung seems to be shifting away from its own Exynos chips toward Qualcomm’s Snapdragon processors. Reports suggest that the forthcoming Galaxy S25 series might incorporate the Dimensity 9400 rather than the Exynos 2500. This change indicates that Samsung is having trouble meeting performance and profitability goals with its Exynos line, resulting in a greater dependence on Qualcomm’s products, even in home appliances increasingly driven by AI functionalities.
