[News] Samsung Reportedly to Scale down Foundry Production, Shutting down 50% of Lines by Year-end

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Amid concerns on its progress of advanced nodes, Samsung’s DS Division recorded an operating profit of 3.86 trillion won in the third quarter, marking a 40% decline from the previous quarter. Now it seems that the struggling giant plans to further scale down on foundry production, aiming to decrease operations to about 50% by year-end, according to South Korean media outlet the Chosun Daily.

The report notes that Samsung’s semiconductor division is temporarily closing down some production lines at its foundry facilities in response to weak orders from U.S. tech companies and Chinese fabless firms.

According to sources familiar with the situation cited by the report, Samsung has already closed more than 30% of its 4nm, 5nm, and 7nm production lines at Pyeongtaek Line 2 (P2) and Line 3 (P3). Furthermore, the company is said to be carefully keeping an eye on customer orders, and planning to gradually halt operations, possibly shutting down approximately 50% of its facilities by year-end.

Though the financials of its foundry business has not been disclosed separately, analysts project that the chipmaker’s foundry business suffered losses of around 1 trillion won in the third quarter, leading the company to implement cost-cutting measures by shutting down portions of its production lines, according to the report.

Instead of maintaining production lines at low utilization rates, sources cited by the report indicate that Samsung has opted to shut down operations to save on electricity costs more effectively.

The report attributes Samsung’s decision to weaker-than-anticipated orders from Chinese fabless firms, which had previously represented a significant share of Samsung’s 4nm and 5nm production volumes. U.S. trade restrictions on China’s semiconductor sector have led some Chinese fabless companies to postpone their projects ahead of the U.S. presidential election, the report indicates.

The move does raises concerns on whether the company’s technological gap with foundry leader TSMC may be widening. Lee Jong-hwan, a professor of system semiconductor engineering at Sangmyung University, observed that while Samsung seems to prioritize on memory chips, the foundry division has been sidelined, according to the report.

However, in its latest financial announcement, Samsung states that it plans to leverage the mass production on the 2 nanometer (nm) Gate-All-Around (GAA) process to win new clients. The company aims to mass produce 2nm in 2025 and 1.4nm by 2027.

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(Photo credit: Samsung)