[News] Samsung Electronics Exits LED Business

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According to a report by China’s CCTV Finance on October 20, Samsung Electronics has recently begun restructuring its business, with the semiconductor division deciding to withdraw from the light-emitting diode (LED) business.

Samsung Electronics to Focus on Power Semiconductors

The report highlighted that Samsung Electronics’ exit from the LED business is primarily due to the group’s overall performance falling short of expectations.

According to Samsung Electronics’ preliminary unaudited financial results released on October 8 for the third quarter of 2024, both the company’s profit and revenue for the quarter fell below market expectations. Sales were 79 trillion KRW, a 17.2% year-on-year increase but lower than the market estimate of 81.57 trillion KRW. Operating profit was 9.1 trillion KRW, a 274.5% year-on-year increase but down 12.8% from the previous quarter, and also below analysts’ estimate of 11.5 trillion KRW.

Samsung entered the LED lighting business in 2012 by merging with Samsung LED. However, in recent years, the business has continued to struggle, gradually losing its competitive edge in the international market. Although the annual sales from this business reached approximately 10.4 billion RMB, Samsung believed that its contribution to the company’s overall sales was too small to ensure the desired profitability.

Therefore, Samsung decided to divest the LED business to focus more on core areas with better growth prospects, such as power semiconductors and Micro LED technology.

Power semiconductors are primarily used in electric vehicles, smartphones, energy storage, and home appliances. They are responsible for power conversion and current control, and are considered a crucial engine for accelerating industrial growth.

Samsung Expands Power Semiconductor Business

At the beginning of 2023, Samsung established a special task force for power semiconductors, and by the end of the year, it further reorganized its operations, transforming the LED division into the Power Semiconductor Division.

In July 2023, Samsung announced at its Foundry Forum that it would launch 8-inch gallium nitride (GaN) power semiconductor foundry services by 2025, targeting applications in consumer electronics, data centers, and automotive markets.

As part of this strategic plan, Samsung introduced German company Aixtron’s metal-organic chemical vapor deposition (MOCVD) system into its Giheung factory, which specializes in 8-inch wafer foundry, during the second quarter of this year.

Challenges Facing Samsung’s Semiconductor Business

Samsung’s semiconductor division, despite being one of its strongest sectors, is also facing increasing challenges.

In terms of wafer foundry, Samsung has long aimed to compete with TSMC. However, the two still show a noticeable gap in market share. According to the latest rankings from TrendForce in early September, TSMC held a dominant 62.3% market share in the second quarter, while Samsung, in second place, had a share of 11.5%.

Moreover, Samsung’s plans to build a wafer foundry in the U.S. have faced repeated delays. According to Reuters, Samsung has postponed the procurement of equipment for its Texas-based Taylor wafer plant due to difficulties in securing clients willing to collaborate.

The Taylor plant, with an investment of $17 billion, was originally intended to produce advanced chips for markets like artificial intelligence and smartphones, which require extreme ultraviolet (EUV) lithography equipment. Each standard EUV system costs approximately $150 million, and it is currently unclear how many units Samsung had originally planned to order from ASML. Both Samsung and ASML have declined to comment on the delayed equipment orders.

Earlier this year, media reports indicated that Samsung had delayed the mass production timeline for the Taylor plant from 2024 to 2026. However, without securing any cooperative clients, the plant’s prospects remain challenging, even with the delayed production schedule.

Some analysts suggest that if Samsung does not finalize orders for the necessary production equipment by early 2025, the production timeline could be further delayed, considering the time required from chip production to delivery.

Samsung Electronics plays a critical role in South Korea’s economy. As noted by China’s CCTV Finance, Samsung’s exports accounted for about 18% of South Korea’s total export volume last year. A decline in Samsung’s performance not only affects the competitiveness of South Korea’s semiconductor exports but also has a ripple effect on numerous upstream and downstream companies that collaborate with Samsung.

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(Photo credit: Samsung)