Could the memory business be a major driver for the semiconductor foundry business? MonolithIC 3D’s Deepak Sekar says “Yes!”

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:

1. 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.”
2. 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.
3. 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:

“Cadence Collaborates with Samsung Foundry to Deliver Design-for-Manufacturing Solution for 32-, 28- and 20-Nanometer Chip Design”