[ANALYSIS] Yield issues at Samsung Electronics put big bets at risk

A Samsung Electronics employee inspects chip equipment at the company’s factory in Hwaseong, Gyeonggi. [JOONGANG PHOTO]

Samsung Electronics is grappling with semiconductor yield issues that are jeopardizing its big system chip bets and foundry business.

The problem, evident for some time and a favorite topic of the semiconductor trade press, has come to prime time with the rollout of the latest Exynos, a system chip developed by Samsung Electronics that is meant to compete with the Snapdragon lineup. from Qualcomm and allow the company, the world’s largest smartphone maker, to match the performance of Apple products.

“Samsung Electronics has encountered difficulties in increasing production yields of 4-nanometer chips, as shown by the delayed delivery of its Exynos 2200,” said Jeong In-seong, a semiconductor specialist who wrote “L ‘future of the semiconductor empire’.

The introduction of the Exynos 2200 was delayed for a week in January.

“Samsung Electronics had to reduce the number of countries in which Exyons-powered Galaxy S22 models are retailed due to the yield issue. It only shipped them to a handful of smaller markets in Europe,” it said. -he declares. In the company’s main smartphone markets – the United States, Korea and India – all Galaxy S22s were equipped with Snapdragon processors.

Yield rate is the amount of a silicon wafer that is successfully processed into dies, which are themselves packaged into semiconductors. The lower the yields, the less product is produced.

Samsung Electronics has not confirmed the actual yields of its 4 nanometer chips, but Korean media have estimated the rate at 20-30%. TSMC reported yields of around 80% for its 5 nanometer products in 2019.

In this context, Samsung Electronics recently launched an internal investigation into its foundry business division, or chip manufacturing. These surveys are usually undertaken to take a closer look at the operations of poorly performing units, although a Samsung Electronics spokesperson said that in this case it is simply “a regular occurrence to improve competitiveness”. .

This is the first time that the foundry activity, which became a division in its own right in 2017, has been the subject of such an investigation.

Kang Moon-soo, head of the foundry market strategy team at Samsung Electronics, acknowledged the difficulties in producing chips based on the latest manufacturing techniques during a conference call in January.

“It’s true that we struggle to ensure a stabilized yield rate at the start” of adopting the new manufacturing process, Kang said, citing the complexity of the manufacturing process.

With the surge in data traffic and increasing loads of sophisticated data functions for processing machine learning and metaverse functions, chipmakers like Samsung Electronics and Taiwan’s TSMC are working hard to pack more transistors on integrated circuits (IC).

In doing so, they begin to come up against certain technical and physical limitations.

“To increase chip performance, the manufacturer needs to embed more transistors on ICs that are already infinitesimal,” said HMC Investment Securities analyst Greg Roh. “At the same time, it has to manage possible overheating through different hardware and software techniques, because the higher the transistor density, the higher the risk of overheating.”

Samsung Foundry manufactures chips installed in the company’s Galaxy S22 series – Exynos 2200 and Qualcomm’s Snapdragon 8 Gen 1.

The data processing speed of the S22 was comparable to that of the S21, its predecessor, which was equipped with the Snapdragon 888 and the Exynos 2100. Compared to the iPhone series, the average score of the S22 Ultra, the top unit of range of the latest series, was in line with that of the iPhone 11 Pro, according to Geekbench.

TSMC manufactures processors for the iPhone series.

Local media reported that Qualcomm, one of the Korean chipmaker’s biggest foundry customers, has chosen TSMC over Samsung Foundry to manufacture Snapdragon 8 Gen 1 Plus and the upcoming 8 Gen 1 series version, which will be rated at 3 nanometers. .

TSMC held 53.1% of the foundry market in the third quarter, according to Taiwanese research firm TrendForce, and Samsung Electronics held 17.1%.

As for mobile processors, Samsung Electronics held 4% of the market in the last quarter of last year, down 6 percentage points year on year, according to Counterpoint Research.

“Samsung Electronics is revamping its smartphone portfolio strategy of insourcing and outsourcing to Chinese ODMs. As a result, the share of MediaTek and Qualcomm chips has increased across Samsung’s smartphone portfolio, from mid-range 4G and 5G models manufactured by ODMs to flagship models,” the research company wrote, referring to original design manufacturers, who manufacture products under contract.

TSMC plans to invest $44 billion this year alone to ramp up production in its foundry business. Samsung Electronics upgraded its investment plan last year on processor development and foundry to 171 trillion won ($137.9 billion) by 2030, meaning it is investing around half the rate of TSMC.

The Suwon, Gyeonggi-based company took a big step last year to build a new foundry plant in Taylor, Texas, investing at least $17 billion. Construction has yet to begin, despite its original plan to break ground in the first quarter.

“Samsung Electronics’ competitiveness in the system-on-chip space has weakened,” said Kim Yang-jae, an analyst at KTB Investment & Securities.

“It has increased the share of outsourced chips in its own products,” he said, predicting that the next foldable models, which are due out in the second half, will use Qualcomm’s Snapdragon chips.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]

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