New Supergap Weapon to Flip the 'Foundry War' Landscape [Samsung's First 3nm Mass Production]

Samsung Electronics Secures Foundry Super-Gap... Closing Gap with TSMC Is a Matter of Time
Meaning and Challenges of 3nm Mass Production

[Asia Economy Reporters Sunmi Park and Hyunseok Yoo] Samsung Electronics' announcement on the 30th that it has started mass production of 3nm (nanometer) semiconductors for the first time in the world signifies that it possesses the technological capability to produce the most advanced and challenging products first. Recently emphasizing 'technology management,' Samsung Electronics Vice Chairman Lee Jae-yong has secured a 'super-gap' not only in memory but also in foundry (semiconductor contract manufacturing). If yield (the ratio of good products produced compared to design) is properly secured, reducing the market share gap with TSMC, the foundry industry leader by sales, is only a matter of time. In the foundry business structure, differences in process technology directly affect the volume of orders from client companies, making it a critical factor. This also raises the possibility of achieving the 'No. 1 system semiconductor by 2030' goal set by Vice Chairman Lee to a higher level.

◆Next-generation core technology 3nm, Samsung 'takes the lead' = In semiconductors, the nanometer refers to the linewidth of circuits; the shorter the linewidth, the more efficient and higher-performing the semiconductor can be. This also leads to increased productivity. Consequently, orders naturally concentrate on the company that first adopts advanced designs. Samsung Electronics entering 3nm semiconductor mass production ahead of competitors carries significant meaning that could change the global semiconductor market landscape.

With Samsung Electronics taking the 'first step,' 3nm process sales in the foundry market are expected to accelerate this year. According to market research firm Omdia, sales from processes below 3nm will start at approximately $3.971 billion this year, growing to $11.239 billion in 2023, $18.644 billion in 2024, and $25.450 billion in 2025, representing an average annual growth rate of 85.6%.

For the 5nm process, which is a generation above 3nm, sales this year are estimated at $15.452 billion, making it the largest share among all processes. However, its average annual growth rate is only 7.5% through 2025, with sales expected to reach about $18.263 billion in 2024. This indicates that 3nm process sales will surpass 5nm. Samsung Electronics and TSMC are currently the only companies worldwide to have introduced sub-10nm ultra-fine processes. The competition will be decided by who takes the lead in the exponentially growing market for processes below 3nm.

To overcome the limits of fine processes, Samsung Electronics has proactively introduced next-generation technology, applying industry-first Gate-All-Around (GAA) technology in this 3nm process. The company plans to mass-produce second-generation 3nm products next year and 2nm products in 2025.

Competitor TSMC plans to start mass production of 3nm processes based on FinFET technology in the second half of this year. Although both Samsung and TSMC will begin 3nm processes this year, Samsung's GAA technology is evaluated to be superior to TSMC's FinFET technology in terms of performance and power consumption. If Samsung succeeds in improving yield, it will have an advantage in securing customers.

◆Experts: "Yield will improve over time" = Industry insiders believe Samsung Electronics' foundry super-gap technology will play a significant role in reducing TSMC's market share lead. According to Omdia, Samsung Electronics' foundry division recorded sales of about $16.9 billion last year, with a market share of 16.3%. This is a large gap compared to TSMC's $51.3 billion sales and 49.5% market share. However, considering that Samsung's foundry division sales started at $11.7 billion in 2018, it has achieved an average annual growth rate of about 13%, laying the groundwork to narrow the market share gap with TSMC through this 3nm mass production milestone.

A Samsung Electronics official explained, "Foundry is an order-based industry, so growth is possible only by securing customers," adding, "Last year, the number of foundry customers exceeded 100, a more than threefold increase compared to the 30 customers at the time of the foundry division's separation in 2017. Our goal is to secure more than 300 customers by 2026."

With the application of GAA technology, the breakthrough beyond the limitations of existing FinFET processes is expected to attract more customers. Currently, fabless semiconductor design companies have limited choices between Samsung Electronics and TSMC for orders. Global fabless companies designing mobile APs are actively working to secure as much advanced process capacity as possible.

Professor Jaegun Park of Hanyang University's Department of Convergence Electronics Engineering said, "The fact that Samsung started mass production of the 3nm process, classified as an advanced process, before TSMC itself is meaningful," adding, "Since Samsung applied GAA technology first, companies like Qualcomm, Nvidia, and Intel, which had concentrated orders with TSMC, are expected to turn their attention to Samsung." He continued, "Although yield may be low at this initial stage of mass production, it is a problem that can improve within a few months. Because Samsung started first, the yield stabilization period will come earlier than TSMC's, ultimately contributing to narrowing the market share gap with TSMC."

Executive Director Kihyun Ahn of the Korea Semiconductor Industry Association also stated, "Samsung has secured a clear technological leadership position by starting the 3nm process with GAA technology before TSMC, which is also attempting it," adding, "Yield is a problem that can be overcome over time."