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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According to a report from Economic Daily News, while the industry is still focusing on the launch of Apple’s new products featuring self-developed M4 chips, Apple is reportedly making significant investments in the development of its next-generation M5 chips, to strengthen its position in the AI PC competition with more powerful ARM architecture processors.

Notably, the report highlighted that Apple will continue to adopt TSMC’s 3nm process, increasing orders for TSMC’s advanced processes. According to the report, it is expected that the next-generation M5 chip will be launched as early as the second half of next year to the end of the year.

In the current wave of AI PC competition, tech giants in the x86 camp, such as Intel and AMD, have launched new processors to vie for market share. Meanwhile, Apple, the market leader in the Arm camp, is accelerating its efforts to expand its presence and continue to develop next-generation self-developed chips, as indicated by the report.

According to the report, citing industry sources, Apple’s upcoming M5 chip is expected to deliver enhanced AI performance and computing power, potentially triggering a new wave of iPhone purchases. The report indicated that this will generate substantial chip foundry orders for TSMC. Plus, it will also benefit Apple’s end-product partners, such as Foxconn and Quanta.

Regarding Apple’s decision not to use TSMC’s 2nm process for the M5, the report, citing industry sources, noted that this is primarily due to the high costs. However, compared to the M4, the M5 features significant advancements, as it will utilize TSMC’s 3D chip-stacking technology, known as SoIC. This approach allows for better thermal management and reduced leakage compared to traditional 2D designs, as the report pointed out.

Apart from using TSMC’s 3nm process for chip development, the report noted, citing industry sources, that Apple has actively placed orders for TSMC’s 2nm process and the first batch of production capacity of the A16 process.

According to the report, The 2nm process is expected to be introduced as early as next year in the APs for Apple’s iPhone 17 Pro and 17 Pro Max models. As for the rumored ultra-thin iPhone 17 Air model, its AP may continue to use the 3nm process family.

Regarding clients for the 2nm process, the report noted, citing comments from TSMC’s chairman C.C. Wei during a previous earnings call, that inquiries for the 2nm process are outpacing those for the 3nm process. Additionally, the A16 process is considered highly attractive for AI server applications.

Wei noted that high-performance computing (HPC) applications are increasingly moving toward chiplet designs; however, this shift will not impact the adoption of the 2nm process. According to the report, current customer demand for the 2nm process exceeds that of the 3nm process, and production capacity is expected to be higher, as the report indicated.

According to an industrial source cited by MoneyDJ, TSMC started the mass production of 3nm in 2022, while the 2nm is expected to enter volume production in 2025, indicating that the generation cycle for a node has been expanded to three years.

Thus, supported by TSMC’s major clients, the contribution from 3nm will continue to rise next year and remain a key revenue driver in 2026, while the 2nm process is expected to replicate or even surpass the success of 3nm, MoneyDJ notes. According to previous market speculations, tech giants such as Apple, NVIDIA and AMD are believed to be the first batch of TSMC’s 2nm customers.

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• [News] TSMC Says 2nm More Sought after than 3nm; A16 Attractive for AI Server Clients
• [News] TSMC’s 2nm Wafers Reportedly Set to Double in Price, Benefitting IP/ Material Companies

(Photo credit: Apple)

As Qualcomm unveiled the Snapdragon 8 Elite chipset earlier this week, Samsung, which has been working on its in-house Exynos 2500 to improve the 3nm yield, is said to abandon the plan and go Snapdragon 8 Elite only for the entire Galaxy S25 series. To turn the tide, it is reportedly embarking on the development of its next-gen Exynos chip, set to be featured in the Galaxy S27, according to Korean media outlet Sedaily and Wccftech.

The chip is expected to be manufactured with Samsung’s 2nm node, probably the SF2P process, which is an improved version of its first generation 2nm process, the reports note. Therefore, this would be a key battleground for Samsung, as it has been suffering from yield issues regarding 3nm node with GAA architecture for long.

And it does look like that Samsung aims high for the chipset, as the next-gen Exynos chip has been reportedly codenamed “Ulysses,” the Roman name for Odysseus, the hero from Greek mythology, according to Sedaily.

According to the reports, the SF2P process is slated for mass production in 2026, with enhancements in both performance and power efficiency. To be more specific, SF2P aims to improve performance by 12% while reducing power consumption by 25% and chip area by 8% compared to its predecessor.

It is also worth noting that Samsung’s foundry division is reportedly producing test chips and verifying the process design to refine the node.

Citing an industry expert, Sedaily notes that Samsung’s foundry has consistently relied on Exynos APs as a key customer. By refining its processes through managing substantial Exynos orders, Samsung has the potential to enhance its competitiveness against TSMC in next-generation chip manufacturing, although the challenge remains significant.

The challenges ahead for Samsung is formidable for sure. Foundry giant TSMC’s 2nm is expected to enter volume production in 2025, and it is already creating a buzz, as Chairman C.C. Wei said earlier that customer inquiries for 2nm are even higher than those for 3nm. According to previous market speculations, tech giants such as Apple, NVIDIA and AMD are believed to be the first batch of TSMC’s 2nm customers.

Another major rival, Intel, has shelved the 20A process node to focus entirely on the more advanced Intel 18A, aiming to enter mass production in 2025.

Japanese chip manufacturer Rapidus, on the other hand, plans to establish a fully automated production line using robots and AI in northern Japan to produce 2nm chips for advanced AI applications, with mass production anticipated as early as 2027.

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• [News] Samsung’s Next Move? Early HBM4 Mass-production and 2nm Foundry Solutions Could Be the Cure
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(Photo credit: Samsung)

TSMC has passed the test of the market with flying colors as it reported record high profit in the third quarter at the earnings call. By confirming that the AI demand is “real,” TSMC Chairman C.C. Wei stated that the foundry giant is expected to enjoy healthy growth over the next five years. But which node would be the one most clients show strong interest in?

According to the reports by the Economic Daily News and MoneyDJ, customer inquiries for 2nm are even higher than those for 3nm, while A16 is highly attractive for AI server applications.

TSMC’s 3nm has already shown robust momentum this year, as its shipments accounted for 20% of total wafer revenue in the third quarter, rising from 9% and 15% in the first and second quarter, respectively.

According to an industrial source cited by MoneyDJ, TSMC started the mass production of 3nm in 2022, while the 2nm is expected to enter volume production in 2025, indicating that the generation cycle for a node has been expanded to three years.

Thus, supported by TSMC’s major clients, the contribution from 3nm will continue to rise next year and remain a key revenue driver in 2026, while the 2nm process is expected to replicate or even surpass the success of 3nm, MoneyDJ notes. According to previous market speculations, tech giants such as Apple, NVIDIA and AMD are believed to be the first batch of TSMC’s 2nm customers.

Citing C.C.Wei, the Economic Daily News notes that the high-performance computing (HPC) applications demand more powerful processors, which accelerates the development of chiplet designs. However, the trend does not seem to impact the adoption of 2nm, and clients are showing even stronger interests for the node compared with 3nm.

And TSMC does plan to expand its 2nm capacity thanks to the strong demand, as the schedule of mass producing 2nm in 2025 remains on track.

According to a previous report from MoneyDJ, TSMC’s 2nm fabs in Hsinchu’s Baoshan and Kaohsiung will achieve a monthly capacity of approximately 30,000 to 35,000 wafers, respectively. By 2027, their combined capacity is set to exceed 100,000 wafers, marking the mainstream transition to the next generation of processes.

As for TSMC’s angstrom-level A16 process, it is creating a buzz even before mass production in 2026. Citing C.C.Wei’s remarks, the report by the Economic Daily News notes that the A16 is highly attractive for AI server applications, and TSMC is actively preparing the related production capacity to meet customer demand.

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After reporting disappointing third-quarter earnings forecast, Samsung’s next move has become the center of market attention. According to a report by Business Korea, to turn the situation around, Samsung may shift its strategy focus to early HBM4 mass production, as well as targeting advanced foundry solutions below 2nm.

A couple of days ago, Samsung warned its third-quarter profit would probably reach 9.1 trillion won, falling short of market expectations. Jeon Young-hyun, the head of Samsung’s Device Solutions (DS) division, issued an unusual public apology in the meantime.

Citing industry sources, Business Korea notes that Samsung’s DS division is expected to post an operating profit of around 5 trillion won (about USD 3.8 billion) for the third quarter, which is reportedly below the market expectation of 6 trillion won. The figure is significantly lower than SK hynix’s projected quarterly operating profit, which is expected to be in the high 6 trillion won range, according to the report.

Samsung May Accelerate HBM4 Progress to Turn the Tide

The series of setbacks have prompted the struggling giant to take action. As Samsung’s lackluster performance could be attributed to its delay in supplying NVIDIA with its 12-layer HBM3e product, industry insiders cited by Business Korea suggest that accelerating the mass production of HBM4, as well as introducing 2nm foundry solutions, could just be the remedies Samsung needs.

In terms of the HBM market, in which Samsung is lagging behind SK hynix on HBM3e verification, the report indicates that Samsung is expected to prioritize the early mass production of HBM4, which is projected to become mainstream in 2025.

A source familiar with the situation told Business Korea that HBM orders from companies other than NVIDIA would rise next year. Major tech firms, including AMD, Amazon, Microsoft, Google, and Qualcomm, are also working on AI semiconductors. Therefore, it does not necessarily mean that Samsung should concentrate solely on NVIDIA, and it could accelerate supply contracts with NVIDIA’s competitors, the report notes.

TrendForce’s latest findings indicate that Samsung, SK hynix, and Micron have all submitted their first HBM3e 12-Hi samples in the first half and third quarter of 2024, respectively, and are currently undergoing validation. SK hynix and Micron are making faster progress and are expected to complete validation by the end of this year.

2nm Advancements Would be Another Focus

On the other hand, in terms of the foundry sector, the report suggests that Samsung is expected to further enhance its ‘turnkey order’ strategy. This approach addresses concerns about technology leakage while providing HBM as part of a comprehensive package.

According to the report, Samsung is set to begin mass production of its GAA 2nm process in 2025. The company also aims to complete the development of the 2nm process with Backside Power Delivery Network (BSPDN) technology by 2027. Having secured 2nm orders from Japan’s AI unicorn Preferred Networks (PFN) and U.S. AI semiconductor company Ambarella, Samsung reportedly plans to seek collaboration with major tech firms.

To attract customers, Samsung will host the “Foundry Forum 2024” online on October 24. Previously scheduled to be held in Beijing, the event will now be conducted virtually, which aligns with the company’s efforts to reduce costs. Will it make further progress in advanced nodes? The whole world is watching.

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(Photo credit: Samsung)