[Analysis]Intel's foundry foray could counter Samsung's chip plan
Intel’s foray into contract chip manufacturing, or foundry, will likely pose challenges to market leaders Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics, heating up competition in the booming chip fabrication business.
Some see the Santa Clara, California-based company’s deep history and abundant intellectual property as a serious threat to the dominant positions held by companies in Taiwan and Korea, while others are more skeptical due to Intel’s recent delays in developing more advanced manufacturing processes.
The market consensus is that the move, announced by Intel CEO Pat Gelsinger on March 23, will affect the chip makers in the long run since Intel targets the likes of AMD, Nvidia, Apple and Qualcom as main customers, clients of Samsung and TSMC.
“TSMC and Samsung Electronics both are bound to compete with Intel’s foundry business in the mid-to-long run,” said Ryu Young-ho, an analyst at Mirae Asset Daewoo.
The use of “mid-to-long run” reflects the analysis that Intel won’t be an immediate threat given the significant time needed for the completion of a new chip plant. Intel’s two $20 billion factories in Arizona are scheduled to begin operations in 2024.
Since the new plants will start with 22-nanometer chips, it will be slow in moving to more advanced and dense semiconductors.
The CEO mentioned that Intel is currently working with partners including Amazon, Cisco, IBM, and Microsoft in spearheading the foundry business.
The Intel initiative will also likely gain a policy boost from the Joe Biden administration as it has championed chip manufacturing inside the U.S. in the wake of a global chip shortage disrupting the supply chains in the automobile and electronics sectors.
An industry source says that the massive amount of investment planned indicates that Intel is already on track to win major orders from corporate clients.
“Given the size of spending, it appears that Intel is confident that it could secure a fair market share as well as orders,” the source in the semiconductor industry projected.
Of the two existing makers, some analysts say that Samsung is standing to lose more since it trails TSMC, which controls 50 percent of the market.
“The emergence of a new rival will hit Samsung harder than TSMC because Samsung is placed in a tougher position in terms of defect rate, pricing and density,” said Song Myung-sub, an analyst at Hi Investment & Securities.
Even though the two producers brought 5-nanometer chips to the market, those of Samsung is known for having higher defect rate and lower functionality, according to Song.
Samsung has denied the problem linked with higher defect rate.
But there is some skepticism for the possibility of Intel becoming a sizable market player in foundry, because it repeatedly failed to fulfill the promise of delivering 7-nanometer chips in line with its roadmap.
Samsung and TSMC have gone ahead with 5-nanometer chips.
“Intel’s entry into the business won’t likely pose a serious threat to Samsung and TSMC, ” said Heo Ji-su, an analyst at Daishin Securities, adding that the U.S. chipmaker’s first 7-nanometer CPU is set for mass production starting in 2023.
BY PARK EUN-JEE [firstname.lastname@example.org]