Bottom line: Samsung executives responded to investor questions about the future opportunities of their chip factories during a recent income statement. In fact, they are planning a big expansion, but this will require a correspondingly large investment, paid for by their clients. Samsung’s current manufacturing facility had already been sold to its partners at standard prices before the chip shortage began, but as hardware developers experience growing demand, they will pay for Samsung’s new capacity at prices that reflect the current market.
Samsung invested 12.5 trillion won (US $ 10.9 billion) in its foundry last quarter. Ben Sukh, company representative, told investors that “investment in foundry has been focused on expanding capacity for advanced processes such as the 5nm EUV to meet customer needs.”
Moving forward, Samsung foundry “will accelerate growth by increasing the capacity of the Pyeongtaek S5 Line and adjusting prices to accommodate future investment cycles.” Pyeongtaek is one of Samsung’s most advanced foundries that can manufacture 5nm and 4nm second generation products.
“We will maximize our chip supply capabilities by strengthening our cooperation with large foundries and will flexibly adjust our product range, prioritizing value-added production,” Sukh said.
Samsung is not the first foundry to raise prices, although they have been the most outspoken about it. It is reported that TSMC has stopped offering discounts to its loyal customers, as was the case in the industry. Another UMC foundry also raised some prices last year.
Increased production costs can have a negative impact on retail prices for equipment. But in the long run, if profits are reinvested in the way Samsung promises, then next-generation hardware won’t suffer from scarcity.
Until then, Samsung has no quick fix. In the second half of the year, “we expect total demand to outstrip supply due to growing demand due to accelerating 5G penetration, the continued trend towards work from home and growing demand for safety stocks from customers,” said Samsung’s Sean Tan. said.