Samsung's foundry unit on upswing with orders for Nintendo Switch 2, Galaxy Z Flip 7

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Samsung's foundry unit on upswing with orders for Nintendo Switch 2, Galaxy Z Flip 7

Published: 28 May. 2025, 18:31 Updated: 29 May. 2025, 12:03

Audio report: written by reporters, read by AI

The foundry line at Samsung Electronics' Hwaseong campus [SAMSUNG ELECTRONICS]

Samsung Electronics' foundry unit has scored a rare set of wins, securing high-profile contracts for chips in upcoming Galaxy smartphones and Nintendo game consoles. After a prolonged slump, these developments appear to mark meaningful progress.

But as the company prepares to put its most advanced technologies to the test — while fending off rising competition in legacy nodes — industry watchers say the real challenge begins now.

Samsung plans to equip its Galaxy Z Flip 7, set to launch in July, with the Exynos 2500, an application processor (AP) designed by Samsung’s System LSI division and manufactured using the foundry division’s 3-nanometer process — its most advanced fabrication node currently in mass production.

While Samsung Foundry has previously manufactured 3-nanometer chips for external clients, this marks its first internal order for that node. It's also the first time the company’s Mobile eXperience division will use an Exynos chip in a flagship foldable device.

The switch is expected to reduce costs significantly. For the Galaxy S25 series, Samsung sourced all mobile APs from Qualcomm, driving up procurement costs to 4.79 trillion won ($3.49 billion) in the first quarter — a 37 percent year-on-year increase.

Still, the high stakes are evident. With the Exynos 2500 set to debut in a mainstream consumer device, Samsung faces heightened scrutiny over its yield rates — a key factor for profitability — and over consumer feedback regarding heat generation and power efficiency, which will effectively put its design and manufacturing prowess under the microscope.

In legacy processes, Samsung Electronics' foundry division is expected to see a boost in fab utilization with its new contract for Nintendo’s next-generation console, the Switch 2.

The chipmaker is producing 8-nanometer chipsets for the device, which is set to officially launch on June 5. Nintendo has set a sales target of 15 million units by March next year. While the original Switch, released in 2017, sold over 150 million units globally, its chipsets were manufactured by TSMC. Bloomberg described the new deal as one that “marks a key win for Samsung.”

The Nintendo Switch 2 is demonstrated during a media event in New York on April 2. [AP/YONHAP]

Legacy nodes — typically referring to processes of 10 nanometers and above — tend to have lower profit margins but are steady in demand, making them the cash cow of the foundry business. Chips produced using legacy technology are commonly found in everyday electronics, including refrigerators, washing machines, TVs and automotive systems.

Samsung Electronics’ Device Solutions division head Jun Young-hyun, who also serves as vice chairman, stated during a recent shareholder meeting that the company aims to “enhance profitability in legacy processes to strengthen the core fundamentals of the business.”

Even TSMC, the global leader in advanced semiconductor technology, still relies heavily on legacy nodes. Last year, processes of 10-nanometer or larger accounted for 31 percent of its total revenue. That figure, however, marked an 11 percentage point drop from the previous year as TSMC shifted its business portfolio increasingly toward cutting-edge technologies like 5 nanometers and below — a trend that analysts say has created a temporary supply gap in the legacy market.

Competition in the legacy foundry space is also intensifying. Samsung may have an opening to court former TSMC clients — as seen with its Nintendo win — but the market is growing more challenging.

China’s top foundry, SMIC, and its second-largest, Hua Hong Semiconductor, both of which focus on legacy nodes, recorded year-on-year revenue increases of 29.4 percent and 18.7 percent, respectively, reflecting rapid growth. SMIC, in particular, is closing the technological gap quickly, having recently begun mass production of chips using a 7-nanometer process.

Meanwhile, Intel is not only working on advanced 1.6-nanometer technologies but also expanding collaboration in legacy nodes — especially 12 to 16 nanometers — alongside Taiwan-based firms such as MediaTek and UMC.

“The real challenge for Samsung Foundry is not merely improving fab utilization,” said an industry insider. “To achieve sustainable profit, it must simultaneously prove its competitiveness in leading-edge nodes and secure stable margins in legacy processes.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY LEE GA-RAM [[email protected]]