[Chip Talk] Foundry as the 'Achilles' Heel'... Samsung Goes All-In on 2nm in Second Half

"Secure 2nm Yield Within This Year" Directive
1.4nm Development Roadmap Delayed by Two Years
U.S. Taylor Plant Set to Begin Operations Next Year Faces Obstacles
Deficit Could Widen If Big Tech Clients Are Not Secured

Samsung Electronics' foundry (semiconductor contract manufacturing) division is seeking a turnaround opportunity. With the $51 trillion Taylor plant in the United States set to begin operations next year, the company is determined to secure a yield rate of at least 70% for its 2-nanometer (1nm = one-billionth of a meter) process within this year. Concerns are rising that if Samsung fails to secure major clients before the U.S. foundry plant becomes operational, the scale of its losses could grow even larger.

According to industry sources on July 11, Samsung Electronics has designated securing a stable 2nm yield as its top priority. The 2nm process is directly tied not only to restoring foundry competitiveness but also to normalizing the business of the mobile chipset 'Exynos' developed by the System LSI division.

At the SAFE (Samsung Advanced Foundry Ecosystem) and Foundry Forum held on July 1, Samsung announced that it would postpone its 1.4nm mass production target from 2027 to 2029. This decision is based on the judgment that it must first improve the completeness of its 2nm process. An industry insider said, "For the next two to three years, the 2nm process is expected to be the mainstream in the AI chip market, especially in the United States," adding, "At this point, a 'selection and concentration' strategy is necessary."

Samsung Electronics reportedly achieved a yield rate of over 40% in its 2nm process during the first half of this year. However, after yield issues emerged with the 3nm process last year, the company has struggled to secure major clients. The 2nm process under development this year is directly linked not only to the Exynos mobile application processor (AP) developed by its System LSI division but also to the operation of the Taylor plant in the U.S., which involved an investment of approximately 23 trillion won.

Due to the 3nm yield issue, Samsung was unable to equip the Exynos 2500 in the 'Galaxy S25' model released earlier this year, repeatedly opting for Qualcomm's Snapdragon series and incurring expenditures amounting to several trillion won. Securing a stable 2nm yield is crucial if the company is to apply the next-generation Exynos 2600 to the Galaxy S26, scheduled for release in the first quarter of next year.

Although Samsung recently managed to include the Exynos 2500, albeit belatedly, in the newly launched Galaxy Z Flip7, the Galaxy Z Fold7, unveiled at the same time, still features Qualcomm's 'Snapdragon 8 Elite' as its mobile platform. Benchmark sites are reporting that the Exynos 2500 underperforms compared to Qualcomm's offering.

The Taylor plant in the United States presents an even bigger challenge. Samsung decided to invest $17 billion in 2021, and when considering future process expansion and equipment upgrades, the total project cost is estimated to reach $37 billion (about 51 trillion won).

Although the investment began as a strategic move to strengthen global foundry competitiveness, Samsung's market share has continued to decline. Big tech companies such as Nvidia, Qualcomm, and AMD remain highly dependent on TSMC. If Samsung fails to secure major clients for its 2nm process, this massive investment could become a significant risk. Even if the company receives subsidies from the U.S. government, the absence of profitable clients could further undermine its competitiveness.

In March this year, Samsung Electronics recruited Margaret Han, former Vice President of Global Procurement at NXP and a 21-year veteran of TSMC, as Executive Vice President in charge of foundry operations at its North America subsidiary, in a bid to win over new clients. An industry insider commented, "Although Samsung is in talks with several potential clients regarding mass production using the 2nm process, no concrete contracts have been signed yet," adding, "Even the products under evaluation with Qualcomm are believed to involve relatively small volumes."

The pursuit by Chinese companies is also a factor that cannot be ignored. According to market research firm TrendForce, in the first quarter of this year, TSMC held a 67.6% share of the global foundry market, followed by Samsung Electronics at 7.7% and SMIC at 6.0%, reinforcing TSMC's effective monopoly. While second-quarter market share figures have yet to be released, Chinese companies such as SMIC and Hua Hong Semiconductor are engaging in aggressive price competition, prompting calls for Samsung Electronics to adopt a more differentiated strategy.