According to IC Insights statistics, in 2017, the world's top eight wafer foundries accounted for 88% of the total market share. Among them, TSMC continues to dominate and firmly ranks first.
Among the eight major foundries, Samsung is the only IDM manufacturer. Although it only grew 4% in 2017, it is still the largest IDM foundry.
Data source: IC Insights
Foundry business is Samsung's core section. In recent years, it has put a lot of effort into competing with TSMC for the market voice of advanced process technology with TSMC and has always been a hot topic in the industry.
In recent years, as a giant-level IDM, Samsung has always felt that its wafer foundry business level is not good enough, and regards the industry overlord TSMC as a "thorn in the eye", and has continuously improved its wafer foundry technical capabilities and customer recognition through vigorous investment, independent foundry business, and poaching measures.
2015~2016, as Samsung Foundry's advanced process capabilities gradually matured, it won many orders from TSMC and had a lot of revenue. At that time, the smartphone market was in a platform period (the recession began to occur, but the impact on the related industrial chains had a lag effect), and the demand for related chips was still relatively strong. These two factors have led to a significant increase in Samsung Foundry in 2016.
From 2016 to 2017, with the further maturity of TSMC's advanced process, some of Samsung Foundry's large orders were snatched back by TSMC; in addition, the global smartphone market declined in a comprehensive manner, and its negative effects began to appear, and the demand for related advanced process chips was greatly reduced. It can be said that these two factors are the main reasons for the sharp decline in Samsung Foundry's year-on-year sales growth (4%) in 2017.
At the Samsung wafer foundry forum held in Seoul, South Korea, in early 2018, a relevant person in charge of Samsung said: "The goal this year is to increase the market share of wafer foundry from fourth to second by the end of the year, surpassing UMC and GF. It is planned to surpass TSMC in the future."
In 2017, Samsung's wafer foundry department's revenue was US$4.6 billion and its market share was 6%. According to IC Insights statistics, in 2018, TSMC will achieve revenue of US$34.765 billion, with GlobalFoundries, which ranked second, having revenue of US$6.64 billion. This year, Samsung's wafer foundry revenue is expected to increase to US$10 billion, and the market share will rise to 14%. This surpassed GlobalFoundries, ranking second behind TSMC.
However, the report also pointed out that Samsung's market share has increased mainly due to the effect of splitting the wafer foundry department, not that there is really a significant growth in performance. Since Samsung's wafer foundry department has its own portal and is no longer affiliated with the system LSI business, the market share of Samsung's own Exynos mobile phone chips has increased sharply in Samsung's wafer foundry revenue.
Capital Expenditure
As a heavy asset business with high technical content, Foundry needs huge amount of capital investment.
In 2017, the total capital expenditure of the top five manufacturers in the foundry industry accounted for as much as 95.6% of the industry's capital expenditure, and the capital expenditure of TSMC and Samsung accounted for 70% of the global Foundry factories. TSMC, one of them, has been vigorously building factories and expanding production, constantly consolidating its position as the leader in the industry.
For Samsung, the R&D expenses of its 90nm process node were US$280 million, while the R&D expenses of 20nm soared to US$1.4 billion, which does not include the later production costs of new production lines and factory construction costs. Therefore, advanced process research and development has gradually become a game for giants. The result is that there are 22 manufacturers with 130nm process production capacity, and the number of manufacturers that can produce wafer foundries with 16/14nm process technology has dropped sharply to 5. The only manufacturers with 10nm, 7nm, and more advanced process technology capabilities are TSMC, Samsung and Intel. Because the cost of R&D of 7nm and 5nm is too high, if there is no sufficient quantity and stable customer support, it will only be a huge loss. Therefore, GlobalFoundries and UMC have successively withdrawn from the battle for 10nm and more advanced process technology this year.
Advanced Process Competition
IC Insights data shows that the global wafer foundry sales in 2017 were US$62.31 billion, of which 24% of advanced processes 16/20nm and below accounted for 24%, about US$15 billion. IDM and OEM market share are evenly shared.
In terms of advanced processes, TSMC is in an absolute leading position, and Samsung ranks second. TSMC conquered the 28nm HKMG process in 2011, and the advanced process has developed rapidly since then. Its 7nm process has been mass-produced in the second half of 2018, and it is expected that the revenue share in 2019 will exceed 20%. 5nm will undergo risk trial production in April 2019 and is expected to achieve mass production in 2020. Samsung announced that it will start production of 7nm in the second half of 2018. Advanced processes with 5nm and below are also being planned.
Figure: TSMC and Samsung's advanced process technology development route (Source: CICC)
wafer foundry advanced process market has always maintained a highly monopoly pattern. Currently, only TSMC and Samsung have the ability to mass-produce 10nm process technology. As an all-round IDM manufacturer, Samsung has a certain competitive relationship with its foundry customers. It has a mobile phone market and its own developed Exynos series SoC chips as negotiation chips, which puts a lot of pressure on its cooperative customers.
Mobile SoC chip is the most important application field of top-notch manufacturing processes. Among the major SoC design manufacturers around the world, Apple's processors were once manufactured by Samsung, and all of them are currently manufactured by TSMC. Qualcomm's flagship chip Snapdragon 800 series and mid-to-high-end chip Snapdragon 600 series have placed orders on TSMC and Samsung; MediaTek's SoC chips are all manufactured by TSMC so far. Samsung Electronics' Exynos series SoCs are all manufactured by Samsung, and Huawei HiSilicon's SoC chips are all manufactured by TSMC so far.
Overall, TSMC and Samsung monopolize the foundry of mobile phone SoC chips using advanced processes.
in terms of transistor density
It is reported that TSMC's 16nm process chip has about 29 million transistors per square millimeter, Samsung's 14nm chip has 30.5 million transistors per square millimeter. In terms of gate length, TSMC's 33nm and Samsung's 30nm.
10nm, TSMC's transistor density is 48.1 million per square millimeter, while Samsung's transistor density is 51.6 million per square millimeter. In terms of
14nm, Samsung's fin height is 49nm, and TSMC's fin height is about 44nm. Although the naming of
is different, the technical levels of TSMC and Samsung are generally on par. Judging from various indicators, the parameters of TSMC 7nm EUV version (N7+) and Samsung 7nm that are mass-produced in 2019 are basically similar.
At present, TSMC's first generation 7nm (not using EUV) has been mass-produced, which is the most advanced process that has been mass-produced on the market. It has a first-mover advantage in time. This advantage can be maintained until at least 2019 (competitors start mass-produced), and TSMC is still expected to be the first-multiple production process in 2019 to maintain its first-mover advantage. It is expected that TSMC will mass-produce more than 50 7nm chips in 2018, including CPU, GPU, AI acceleration chip, mining machine ASIC, network, gaming, 5G, automotive chips, etc.
in terms of EUV use
TSMC and Samsung are the top two ordering customers of ASML.
Currently, TSMC has the most EUV devices, with 10 units, making it the largest customer of ASML, followed by Samsung, with 6 units. As a necessary process equipment for manufacturing processes below 7nm, EUV plays a crucial role in the mass production of the latest process of manufacturers. Due to the extremely high accuracy requirements, TSMC and ASML have in-depth cooperation in research and development.
TSMC iterative speed is fast
After the semiconductor manufacturing technology enters the 14/16nm node, it is necessary to use the FinFET process to suppress the problem of transistor leakage and reduced controllability, which leads to a significant increase in the difficulty of technology development and capital investment. Therefore, this threshold is also regarded as the entry standard for advanced process technology. TSMC's 28nm process began mass production in 2011, leading its competitors for 3 to 5 years, and mass production of 16/20nm from 2014. After that, it entered a period of rapid growth. By 2015, the proportion of the two processes had reached 49%.
In order to give full play to its technological advantages, TSMC pays great attention to the rapid expansion of advanced processes after mass production. For example, after TSMC's 130nm process was put into mass production in 2003, its revenue share rose sharply from 0 to 28% in just one year; after 28nm process was put into mass production in 2011, it also climbed from 2% to 22% in just one year.Rapid expansion of advanced production capacity helps TSMC quickly seize customer resources, expand its first-mover advantage in every advanced process node, and make its capacity structure significantly better than its competitors in the industry. In this way, higher product added value brings higher gross profit margins.
Figure: TSMC's advanced process revenue share in 2017
defects of Samsung's IDM model
Samsung is the world's largest semiconductor company in 2017, with annual revenue of up to US$43.54 billion. Its main businesses include three major parts: CE (Consumer Electronics), IM (IT Mobile Communications), and DS (Device Solution) related to semiconductor manufacturing.
Judging from the revenue structure of Samsung Electronics in the past three years, its DS business has expanded the most obvious speed. In the fourth quarter of 2017, its DS department revenue accounted for more than 40% of its total revenue, becoming one of Samsung Electronics' two pillar businesses.
DS business is further subdivided into semiconductors and display devices, and its foundry department is in the semiconductor segmented business. In 2017, Samsung Electronics' foundry revenue was only US$4.4 billion, accounting for only 13% of Samsung Electronics' total revenue. Since Samsung Electronics is an IDM, its equipment investment and resources should be given priority to the production of storage products such as Samsung Electronics DRAM and NAND Flash, and the resources that can be allocated to the foundry department are relatively limited.
Another problem with Samsung Electronics OEM's OEM department is industry competition. Samsung's business scope is wide, and major customers such as Apple and Qualcomm are themselves competitors of Samsung Electronics. Even if intellectual property rights and patents are well protected, they cannot guarantee the flexibility and autonomy of the supply chain and the impact of upper-level competition. For example, Apple's A4~A7 series processors are both manufactured by Samsung. After a series of patent lawsuits broke out in 2011, Apple transferred the A8 to TSMC OEM, the A9 was handed over to TSMC and Samsung OEM respectively, and the A10 was all manufactured by TSMC.
Due to the above reasons, although Samsung Electronics' foundry department is comparable to TSMC in terms of process technology progress, its background determines that it is difficult for it to become a giant in the wafer foundry field.
Therefore, Samsung decided to separate the wafer foundry business in 2017 to further enhance its market competitiveness.
In summary, in order to improve competitiveness, Samsung is adjusting the business structure of wafer foundry, while TSMC is still consolidating its own advantages. The market competition between the two strong will be more interesting in the next two years.
