Go back to the beginning

Lee Sang-jae
The author is a deputy director of business and industry news at the JoongAng Ilbo.

Samsung Electronics’ Pyeongtaek campus spans over 2.89 million square meters (714 acres) of land, almost the size of Yeouido, the political and financial hub of the country. The newest Pyeongtaek Line 4 joining the state-of-art chip complex cost more than 10 trillion won ($7.4 billion) just for the exterior. The building is nearly completed after 24/7 construction, but facility equipment has not been moved in. Samsung Electronics originally planned to bring Dutch extreme ultraviolet (EUV) lithography and other cutting-edge equipment for the generational shift in the new foundry, but the company has decided to put off the import and leave the fab idle until it becomes more confident about market prospects in the second half, according to a company official.

The world’s largest memory maker chose not to plug in what would be the world’s biggest and most expensive chip plant, and it may be a wise move. The latest hotcake for dynamic random access memory (DRAM) makers amid a stagnated market is high bandwidth memory (HBM), whose sales are estimated to top 22 trillion won to take up 20.1 percent of global DRAM sales this year, according to market tracker TrendForce. HBM boasts much higher bandwidth with a larger capacity while consuming less power compared to traditional DRAM to become ideal for large data processing and computing to back graphic processing units (GPU) and faces frenzied demand amid the AI boom.

Samsung Electronics commands the DRAM market and yet it lags behind its home rival SK hynix in HBM production. SK hynix is the principal supplier of HBM3 to power Nvidia’s GPU servers that dominate 90 percent of global AI chips. Samsung Electronics’ HBM3 version is being tested by the dominant GPU supplier. The company’s shares jumped after Jensen Huang, Nvidia’s CEO, revealed that his company was testing out Samsung’s HBM and implied the addition of the Korean company to its vendor list. Samsung may be the top in memory technology, but it also stands humbly at the mercy of market demand.

In chipmaking, the yield rate becomes the single most important factor. The increased rate of yield of microchips churned out from a wafer reduces the overall manufacturing costs and raises profitability. Reuters recently reported that Samsung HBM3 chip production yields are at 10 to 20 percent, compared to SK hynix’s at 60 to 70 percent. SK’s stronger production yields can explain its fastest turn to profit-making among key memory makers in the fourth quarter despite the overall DRAM slump.

Samsung Electronics was able to stay ahead in the chip game at the whipping of its late chairman Lee Kun-hee. Lee scorned executives on their negligence of duty when Hwang Chang-kyu, the CEO of the chip division, admitted and briefed his boss about the company lagging in production yields versus hynix during the transition in processing technology in July 2007. Lee, usually gentle, lost his temper and lectured him for more than 10 minutes for losing the No. 1 position in chip production yield even for a brief period. The chip division underwent rigorous reorganization, revamping the C-suite and establishing an auditing system for management.

SK hynix’s HBM business also had a bumpy start. Its second-generation HBM2 released in 2016 was a total failure. It failed to meet the capacity and delivery expectations of its clients. A business cannot run unless it satisfies the clients in capacity standards and delivery date. The company bolstered investment in HBM and aggressively chased after engineers in Samsung’s Onyang campus, which is mostly responsible for the post-process chip packaging.

The Onyang campus has been the subject of sales talks for 20 years since late the 1990s. Many of its employees moved to SK hynix, which offered better treatment. The workforce helped empower SK through the HBM edge.

The chip battlefield becomes unpredictable due to the U.S.’ strong will to restore chip sovereignty, Japan’s renewed eagerness and Intel’s aggressive foray into the foundry business. Even without the external headwinds, what Samsung needs is self-reflection by recalling the rebukes of its late chairman. It must go back to the days when it had to fight hard for the market as a latecomer in the chip game.

Samsung indeed vowed to innovate itself. Kyung Kye-hyun, CEO of Samsung Electronics Device Solutions, told shareholders last week that it will be releasing its own AI accelerator chip — the Mach-1 — that won’t need HBM for inference of a large language model, by the end of the year-end. It is out to crack the market currently dominated by Nvidia.

Whether Samsung succeeds in the game-changing move this time, too, cannot be known. One Samsung executive said the company stresses fearlessness in taking up new challenges. But when the project does not meet expectations, the executive is sacked and the team dissolved.