Samsung Electronics has been successful in attracting clients in mature processes such as 5-nanometer and 8-nanometer, which have already secured yields, thereby increasing the operational rate of its foundry production lines.
In particular, it is planned to produce the Nvidia Tegra system-on-chip (SoC) for Nintendo's ambitious project "Switch 2" using the 8-nanometer process, while orders from domestic and international corporations for 5-nanometer are also pouring in. Samsung Electronics aims to build trust in the industry and diversify its clients by accumulating orders centered around mature processes that have already secured yields of more than 70% to 80%.
According to industry sources on the 14th, the initial sales volume of the Switch 2 produced in Samsung Electronics' 8-nanometer foundry process is expected to exceed 15 million units. This is seen as good news for Samsung's foundry, which is struggling with declining operational rates. An industry official noted, "Nintendo's projected 15 million sales figure for the Switch 2 is conservatively set due to price increases and tariffs," adding, "In reality, it is expected to surpass 20 million units in sales within 1 to 2 years."
Initially, Nintendo was deliberating between Samsung Electronics' 5-nanometer and 8-nanometer processes, but it is reported to have chosen the 8-nanometer process, which does not use extreme ultraviolet (EUV) lithography equipment. Although chip performance is somewhat lower than that of 5-nanometer, there are advantages in terms of cost and yield. It is also said that Nintendo considered TSMC's 7-nanometer and 8-nanometer processes, but chose Samsung's foundry due to its fast and stable delivery and pricing advantages.
The Switch 2 is continuing its early success with 2.2 million lottery applications in Japan alone, and plans to strengthen production capacity with the global launch. A source familiar with Samsung Electronics said, "There remains a possibility that Nintendo will use other processes from Samsung Electronics' foundry for performance improvements after the Switch 2's launch," adding, "This order will serve as an important reference for Samsung's foundry in the gaming console market, and future orders from competitors like AMD can also be expected."
Samsung's foundry is focusing not only on marketing toward large clients but also on attracting fabless clients. It is maintaining collaborative relationships with several dark horses, including domestic artificial intelligence (AI) fabless companies such as DeepX and Boss Semiconductor. With the mass production process of domestic fabless companies starting in the second half of this year, an increase in foundry operational rates is anticipated.
The fact that the competitor TSMC is hesitant to attract Chinese clients due to the unfolding U.S.-China conflict is also working to the advantage of Samsung Electronics' foundry division. Samsung Electronics has been working to attract clients by integrating numerous Chinese semiconductor design automation (EDA) corporations into its foundry ecosystem since several years ago.
Samsung Electronics' foundry division is also in discussions for custom chip (ASIC) manufacturing with Chinese fabless companies and AI chips. In particular, it is reported that the number of Chinese fabless companies utilizing 4-nanometer, 8-nanometer, and 14-nanometer, for which Samsung's foundry has recently secured a certain level of yield, is increasing. It is explained that Samsung Electronics is preferred because the yield and performance of SMIC, China’s largest foundry company, are unstable below the 7-nanometer process.
A source familiar with Samsung Electronics stated, "A significant number of production line facilities that had been halted this year have begun to be powered back on and product production has started. From this second half of the year, a full capacity plan is in place for all production facilities to be engaged in product manufacturing," adding, "While securing advanced process orders is important, a strategy to maximize the yield of 'well-performing processes' is also being pursued to secure overall operational rates and order references."