In a significant shift for its semiconductor business, Samsung Electronics is reportedly scaling back operations at its foundry facilities, specifically targeting the 4 nm, 5 nm, and 7 nm production lines. This decision has arisen due to persistently weak demand in the market and substantial financial setbacks that the company has experienced lately, which are estimated to be in the tens of billions of won during the third quarter of 2024. The initiative is aimed at reducing costs and streamlining operations in a challenging economic landscape.
Sources from the industry indicate that Samsung has already shut down over 30% of its production capacity dedicated to these specific process nodes at its Pyeongtaek campus, with plans to increase this reduction to nearly 50% by the end of the year. In a report by the South Korean publication ChosunMedia, it was highlighted that the semiconductor division has struggled to secure sufficient mass production orders from key tech players, such as Nvidia, AMD, and Qualcomm. This struggle has led to a reported deficit of 1 trillion won, approximately USD 724 million, in the last quarter.
In an effort to alleviate mounting expenses, including rising electricity costs, Samsung has opted to power down production equipment rather than maintain operations that are not yielding returns. This decision reflects broader trends within the semiconductor industry, where lower-than-expected orders from Chinese fabless semiconductor companies have adversely impacted production volumes, particularly in the 4 nm and 5 nm sectors.
The situation has been compounded by increased U.S. regulations regarding semiconductor exports to China. These regulations have prompted Chinese semiconductor firms to delay projects, further exacerbating the difficulties facing Samsung’s foundry business. Many experts warn that the current production shutdowns could potentially weaken Samsung’s competitive edge in the semiconductor market. As the company reallocates resources to its memory chip division—historically its more profitable segment—industry analysts caution that Samsung’s foundry business could lag behind rivals like Taiwan Semiconductor Manufacturing Company (TSMC). Professor Lee Jong-hwan from Sangmyung University has voiced concern that this gap may hinder Samsung’s ability to regain its footing if market conditions eventually improve.
Amidst these challenges within the foundry sector, Samsung appears to be pivoting away from its in-house Exynos chips in favor of utilizing Qualcomm’s Snapdragon processors. Recent reports suggest that the upcoming Galaxy S25 series might feature MediaTek’s Dimensity 9400, marking a significant shift from the anticipated Exynos 2500. This transition signifies Samsung’s struggle to meet both performance metrics and profitability expectations with its Exynos line, forcing the company to increasingly rely on Qualcomm’s offerings—even in its home appliances, where integration of artificial intelligence features is becoming crucial.