Samsung Semiconductor seeks to reassure markets on competition

Samsung Electronics has reassured markets on the competitiveness of its semiconductor business after several warnings from investors, analysts and employees that the Korean company was losing its technological edge.

The South Korean conglomerate is a global market leader in memory chips, and maintains an ambition to close the gap over Taiwan Semiconductor Manufacturing Company, a major rival in the foundry sector, where companies are contracted to produce chips designed by others. goes.

Reflecting on the company’s importance to the global economy, US President Joe Biden visited its Pyeongtaek semiconductor plant during a visit to South Korea in May.

But earlier this year the company lost two of its biggest foundry customers, Qualcomm and Nvidia, to TSMC, according to analysts who have suggested Samsung’s inability to deliver steady amounts of 4-nanometer and 5-nanometer chips to the companies. Was disappointed. Central processing unit of computer.

According to market researcher Trendforce, TSMC captured 54 percent of the foundry market in the first quarter of 2022, more than three times Samsung’s market share.

Last year, Samsung announced a Won 171tn ($151bn) investment plan for foundry chips by 2030. But its Taiwanese rival plans to invest up to $44bn this year, compared to an estimated $12bn by Samsung, according to Seoul-based SK Securities.

And in the D-Ram business, traditionally a Samsung strength, rivals Micron Technology and SK Hynix have unveiled some of the most advanced chips. D-RAM technology enables short-term storage for graphic, mobile and server memory chips.

Issues with its flagship Galaxy S22 smartphone launched in February show that the South Korean conglomerate also lags behind Apple in hardware competition, while performance and sales of Samsung’s Exynos 2200 mobile processor chips, which were launched this year, were disappointing. Huh.

Read |  New irrigation research and technology is helping Utah farmers produce food and save water

Investors, including hedge funds Petra Capital Management and Dalton Investments, have expressed concern about Samsung’s rigid corporate culture, led by Samsung’s vice-chair and de facto leader Lee Jae-yong.

He argues that the company has prioritized rapid growth and cost savings over quality and innovation.

Chan Lee, managing partner at Seoul-based Petra Capital Management, said, “Designing your own chips requires creativity and engineering skills, but Samsung’s risk-averse culture has deepened under Lee Jae-yong’s leadership.” Engineers have avoided new attempts at innovation.”

Lee Jae-yong, Samsung's vice president and de facto leader
Investors have raised concerns about a rigid corporate culture under Samsung vice-chair and de facto leader Lee Jae-yong | © Jeon Heon-Kyun/Pool by AP

In April, a junior engineer working on Samsung’s semiconductor technology development team wrote a letter to the company’s leadership complaining that Samsung was failing to meet “impossible” goals for developing new technology and products. The researchers were under enormous pressure, and that “feeling of failure” permeated the organization.

“It seems that the top decision maker is not able to understand the root cause of the problems,” said the engineer. “I’ve heard a few stories of ‘crisis’ but I think this moment is more dangerous than ever.”

“Cultures in a design house and fab are critical to success. These talented engineers need the right inspiration, direction and leadership,” wrote Dylan Patel, principal analyst at SemiAnalysis, in a recent report. He attributed Samsung’s problems to a “toxic” culture in which various business units blame each other for “making mistakes” for their weakness in the non-memory sector.

According to market research company Strategy Analytics, Samsung’s share of the smartphone application processor market has nearly halved since 2019 and ranked fourth last year with 6.6 percent compared to Qualcomm’s 37.7 percent, MediaTek’s 26.3 percent and Apple’s 26 percent. doing.

Read |  WorkWave Launches ServiceBot™ by WorkWave, Providing Powerful AI Sales Technology to a Variety of Service Industries

,[Samsung’s] The technical advantages are all falling,” Patel wrote. “Samsung is slipping on all aspects of technology development, including one area that has historically crushed all competitors, the D-Ram.”

Samsung Electronics reported lower-than-expected operating profit for the second quarter of 2022, as inflation dampened consumer demand for electronic devices.

It is also gearing up for a reduction in demand in response to global price hikes following the pandemic-induced boom in the tech sector over the past two years.

But company executives argue that its memory business still has a technological edge over its rivals thanks to its rapid adoption of extreme ultraviolet lithography technology for memory chip production and a D-RAM market share of about 40 percent.

Samsung’s vice president of foundry business, Kang Moon-soo, described market concerns about the loss of key customers as “overblown,” telling analysts in April that it had an order backlog for the next five years, or Eight times last year’s revenue. from business.

Analysts said TSMC’s rapid transition to mass production of 4nm and 5nm chips has impacted the Korean company’s ability to produce sufficient quantities of state-of-the-art chips for its most prominent customers.

But Samsung told the Financial Times that it is now able to produce the chips in steady quantities and will “maximize” supply. An executive told analysts Thursday that the company is “restructuring” its chip design business to bolster its long-term competitiveness.

Earlier this week, the company held an event to celebrate its first shipment of 3-nanometer chips, which beat TSMC to market the next generation of non-memory chips.

Read |  Vuzix ties up with L3Harris Technologies to develop a new customized waveguide-based HMD system

“Samsung still has a chance to re-engage customers if it can increase the yield rate of advanced chips,” said James Lim, an analyst at California-based hedge fund Dalton Investments. “No one wants to risk being completely dependent on TSMC.”

Samsung also said it is striving to create an “inclusive challenge culture” through “open communication” with employees. It said it continues to speak to employees about the company’s vision and business direction.

There is optimism within the company that Lee, a descendant of the company’s founding family, will receive a clemency from President Yoon Suk-yol next month.

Lee was released from prison last year on parole, having served 60 percent of his sentence for bribing former President Park Geun-hee to secure his family’s control over Samsung Electronics.

But he remains subject to restrictions related to his employment and business activities, complicating his ability to effectively oversee the management of Samsung’s vast conglomerate. A presidential pardon is traditionally given before South Korea’s Independence Day in mid-August.

Source link