Azernews.Az

Samsung Electronics is reassessing its dismissive attitude toward its foundry clients as it continues to struggle in the business, Azernews reports, citing Korea JoongAng Daily.

"Samsung is re-evaluating the company's [foundry] position by having a lot of conversations with clients," said Han Jin-man, head of the company's foundry business, at the company's general shareholder meeting on Wednesday.

"The foundry business will enhance customer satisfaction and secure competitiveness on the back of a mindset that is oriented toward customer service."

While Han didn't specifically mention TSMC, the undisputed market leader in the foundry business, he is apparently mindful of the rival's client-centric emphasis well-captured in its mantra "No competition with clients."

On the other hand, Samsung is an integrated chip producer that designs and produces its own chips on top of contract manufacturing for other companies with its foundry business. Market insiders have noted that the status could make it hard for the firm to attain a customer-first mindset in custom-making chips and adjusting to varying needs.

Samsung Electronics' rare mentions of "customer service" and "clients" come as the company grapples with a plunging market share in its contract chip manufacturing business. Securing a "technology edge" and embracing a "spirit of challenge" have been mentioned before, but never with an emphasis on clients.

The Korean electronics giant once had an ambitious plan to catch up with TSMC, the industry leader, but things have been going in quite the opposite direction.

Executive Chairman Lee Jae-yong said in 2019 that Samsung would pour 133 trillion won ($90.9 billion) into the logic chip and foundry business and become No. 1 in the non-memory sector. The investment plan in 2022 increased to 171 trillion won, underscoring the emphasis Samsung put on expanding its leadership beyond just memory.

Its foundry market share, however, which stood at 16.3 percent in the first quarter of 2022, dropped to 8.1 percent as of the fourth quarter of 2024. TSMC, in the meantime, soared from 53.6 percent to 67.1 percent during the same period, according to data from market tracker TrendForce.

Samsung's haughty attitude is pointed out as one of the main reasons behind its slow progress in securing foundry clients, according to industry sources.

"I was actually turned down by Samsung Electronics' foundry business when I suggested to Samsung that it contract manufacture our products," a CEO from one chip designing company in Korea told the Korea JoongAng Daily on condition of anonymity.

"It looked through our financial statements first and said it cannot work with a company with such weak financials, without even evaluating our technology." The company now manufactures its chips with TSMC.

A similar problem arose in the memory chip sector last year, when its grip on high bandwidth memory (HBM) chips slipped uncontrollably against rival SK Hynix.

"The reason Samsung Electronics lost the lead in HBM to SK hynix is because it lacks a 'service mindset' that provides memory solutions customized to meet client demand," said Yoo Hoi-jun, dean of KAIST Graduate School of AI Semiconductor, at a symposium last year.

"If it fails to move away from its traditional model of mass-producing memory chips compliant to standards as an industry leader, it will continue to struggle to gain an upper hand in the AI market."

Samsung's brand new chip manufacturing facilities in the United States are sitting idle due to an absence of clients despite the completion of most of the construction.

A 2024 business report of Samsung C&T, a construction affiliate of Samsung Electronics in charge of building the chip facilities in Taylor, Texas, indicated 99.6 percent of the construction at the fabrication plants has been completed, but the chipmaker plans to start their operation in 2026, citing market slowdown.

The facilities, with a collective price tag of $37 billion, were originally planned to commence operation in late 2024, but that was pushed back to 2026.

Han from Samsung's foundry business said Wednesday that the division will now begin formulating a strategy to secure clients and advance its manufacturing technology.

"Securing clients is a paramount factor in the foundry business," said Prof. Hwang Yong-sik from Sejong University's Department of Business Administration.

"A haughty attitude will have to be fixed in order for Samsung to have a chance in the foundry business.