Samsung foundry has a hard time competing with TSMC

BusinessKorea reports that Samsung's foundry business is not doing that well as the firm is having trouble finding a breakthrough. While the overall foundry market is expected to grow 7.1 percent this year, Samsung's foundry unit is expected to post growth of just 2.7 percent. Samsung has invested a lot of resources to improve its process technology and production capacity, but customers are not placing more orders.

There are two factors at play here. First up, the article says industry experts believe Samsung's 10nm process is optimized for memory semiconductors. This implies the process is good for small chips and customers don't want to take the risk of adopting it because they prefer the stable and proven alternative.

Samsung Electronics is ahead of its competitor TSMC by six months to one year in developing 10-nano process technology but customers ordering semiconductor production are not on the rise. "Since foundry semiconductors are relatively large compared to memory semiconductors, customers want stable and proven products rather than smaller ones," said Roh Keun-chang, head of Hyundai Investment & Securities Co. "This means that customers are not adopting more advanced technologies unconditionally as a more advanced technology was developed."

Secondly, another problem is that other units of Samsung compete against customers of the foundry business. Apple for example intentionally excludes Samsung from its supply chains.