The third quarter financial results for both Samsung Electronics (Samsung) and Intel are set to be released on October 31, 2024. The outcome likely hinges on how well their management teams can execute cost-cutting strategies.
Recent reports from South Korean media compared the revenue generated by Samsung's memory division when combined with its foundry and IC design revenues. They estimated that in the third quarter of 2024, Samsung's semiconductor revenue would still fall short of TSMC's, projecting around US$20.8 billion compared to TSMC's US$23.5 billion.
This comparison overlooks the critical differences between the IDM and pure foundry models. According to discussions on SemiWiki, while TSMC requires an over 80% yield rate before commencing formal operations at its 3/2nm processes, both Samsung and Intel can initiate operations with approximately 60% yield from a profitability perspective.
The difference lies in the fact that Samsung and Intel can offset losses through their own product lines, whereas external customers including Qualcomm, AMD, Apple, and Nvidia tend to favor TSMC due to its stable yield improvements, which are evaluated based on commercial wafer processing standards.
Thus, each company has its calculations and considerations. Particularly, IDMs focus on enhancing control over their supply chains (cost planning and capacity delivery). As the need for cost control intensifies, building in-house wafer fabrication capabilities becomes the optimal choice following business expansion.
Samsung's own IC design division and Intel's CPU and GPU products have always been key to maintaining their respective competitive advantages.
This trend is particularly evident in China's power semiconductor sector. Leading firms like CR Micro and BYD Semiconductor are inclined to adopt the IDM model, establishing their own fabs to ensure stable capacity supply, shorter lead times, and stronger adaptability in design and production capabilities to meet substantial semiconductor supply demands.
However, when has BYD exhausted its resources to compete with SMIC for foundry orders? Similarly, when Samsung and Intel, operating under the IDM model, engage in competition with TSMC, simply having fab capacity does not guarantee securing external customer orders.
Under current geopolitical risks, diversifying production locations and capacities serves as a protective strategy for Samsung and Intel's foundry operations. However, rather than focusing solely on overtaking TSMC, it might be more prudent to concentrate on refining its order fulfillment processes to ensure customer satisfaction and build a solid reputation.
