Samsung Electronics' foundry division has recently increased its utilization rates by securing orders from domestic and overseas artificial intelligence (AI) chip design corporations, including Nintendo, for 7 and 8 nanometers. However, the cutting-edge 3-nanometer process is showing vulnerability after losing a major client to Taiwan Semiconductor Manufacturing Company (TSMC).
Initially, Google's Tensor chip, which was supposed to be produced with Samsung Electronics' 3-nanometer process, is expected to head to TSMC, while major clients like Qualcomm and AMD are also excluding Samsung's foundry from their options. Recently, in the 5 and 7 nanometer sectors where Samsung Electronics is achieving results, China’s Semiconductor Manufacturing International Corporation (SMIC) has successively secured orders, raising tensions.
According to industry sources on the 29th, the yield rate for Samsung Electronics' foundry 3-nanometer process is reportedly stuck at around 50%. Considering it has entered its third year since mass production was declared, enduring a prolonged period of low yield is unusual. In contrast, TSMC is said to have stabilized production efficiency by securing a yield rate of over 90% in its 3-nanometer process. Although TSMC's production costs are higher, TSMC is described as a stable option in terms of chip reliability and performance.
Currently, Apple, Qualcomm, NVIDIA, and MediaTek are utilizing TSMC's third-generation 3-nanometer (N3P) process. It has been indicated that they will transition to a 2-nanometer process starting in 2026. Google also plans to reduce the performance and power efficiency gap with competing systems on chip (SoC) through the Tensor G5, which will be produced using TSMC’s second-generation 3-nanometer process.
The issue is that corporations that were in discussions with Samsung regarding advanced process production are increasingly finding problems during the testing phase and turning to TSMC. A semiconductor industry insider noted, "The most important aspect in the foundry industry is the trust relationship with clients," adding that "Samsung Electronics facing difficulties in high-end processes due to yield issues is raising doubts about its foundry and will take a long time to recover."
In this context, China's SMIC is narrowing the gap with Samsung's foundry while strengthening its influence, mainly in the domestic market. Recently, despite being unable to import extreme ultraviolet (EUV) lithography equipment due to U.S. semiconductor sanctions, SMIC has achieved results by starting production of 5 nanometer chips following 7 nanometers. Although it is expected to be at a disadvantage in yield and chip performance compared to Samsung from 5 nanometers onwards, there are observations that the Chinese government's subsidies could offset this.
Previously, China’s Huawei announced that it would launch laptops equipped with SMIC's 5-nanometer chips. Local media reported that Huawei, which had long viewed 7-nanometer semiconductors as technically limiting, is demonstrating a groundbreaking leap in Chinese semiconductor technology by incorporating its self-developed and mass-produced 5-nanometer chips in new products.
This poses a threat to Samsung's foundry, which has been filling the gaps in utilization rates in advanced processes like 3 and 4 nanometers with 5 and 7 nanometer production. A source familiar with Samsung Electronics stated, "Samsung's foundry has been attracting Chinese design automation (EDA) corporations into its ecosystem for a long time to secure 5 and 7 nanometer demand from Chinese corporations," explaining that "the rise of SMIC could negatively impact attracting Chinese clients."