Deepak Sekar, Chief Scientist at MonolithIC 3D, has just published a provocative blog with big implications for both the semiconductor memory and foundry businesses. His premise is that even though Samsung has “only” about 7% of the semiconductor foundry business, the company’ semiconductor memory business (Samsung has a big chunk of the memory business, which Sekar estimates at ~40%) gives the company big economies of scale that are easily applied to the foundry business . Here are three of Sekar’s points:
- Semiconductor memory vendors live or die on efficiency because it’s a low-margin business. Often, memory margins are described as “razor thin” and occasionally “negative.” Just last week, I was discussing this aspect of the business in a staff meeting in juxtaposition with the foundry business. Now I find a good answer to the quandary in Sekar’s blog: “Samsung’s reputation for high-yield memory products, you would expect Samsung to get good yields in the logic foundry business. They seem to be delivering on that front. I hear from industry contacts that Samsung is the only manufacturer getting reasonable yields for gate-first high k metal gate products at 28nm.”
- Semiconductor manufacturing is capital intensive, so success often hinges on the ability to make large capital expenditures. Because Samsung is not a semiconductor foundry but a large multinational company with diverse product lines in electronics, semiconductors, and myriad other enterprises, the company has a lot more capital to work with than pure-play semiconductor vendors. “Samsung’s capex to revenue ratio for its foundry business is way higher than anyone else,” writes Sekar.
- Cost of manufacturing tools is directly affected by purchase volumes. Samsun makes a lot of chips for its own systems businesses (consumer, computer, mobile phone) and it makes a lot of memory chips. So the company buys a lot of semiconductor production equipment. Sekar writes: “The highest volume producer, Samsung, has the lowest raw material costs [based on data from 2003].”
There’s a lot more meat in Sekar’s blog and I suggest you take a look.
Other news about Samsung: