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Samsung puts chips on going beyond memory

Investment of $115B jibes with government advice for industry
Apr 25,2019
Samsung Electronics, the world’s largest memory chip manufacturer, announced Wednesday it will invest 133 trillion won ($115 billion) in its non-memory chip business by 2030.

The goal is to become the world’s No. 1 company in the non-memory chip market.

Some 73 trillion won will be used for local R&D activities and the remaining 60 trillion won will be invested in production facilities.

The company said it will hire 15,000 professional staff.

Non-memory refers to a wide variety of chips including processors, image sensors and voltage regulators. Samsung’s non-memory business consists of its foundry business, which is manufacturing non-memory chips for outside clients, and its System LSI (large-scale integration) business, in which Samsung designs, manufactures and sells non-memory chips such as mobile processors and image sensors.

In its Korean statement, Samsung said it will offer support for small, local semiconductor companies without wafer fabrication capabilities by sharing its non-memory chip designs to help them reduce development time and costs. Development tools and software will be part of the support.

It will also lower its minimum order volume for smaller companies that want to use its foundry.

Unlike fairly standardized dynamic random-access memory (DRAM) and NAND memory chips, non-memory chips greatly differ by usage and function and are manufactured in smaller batches. Small chip companies struggle to find big foundries willing to accept their orders.

For Samsung, helping foster domestic companies without wafer fabrication capabilities will bring more orders to its foundry in the long run.

The company has been heavily investing in the foundry business, pushing up its global rank to No. 2 with 19.1 percent market share in this year’s first quarter, from fourth place with 7.4 percent market share in the same period last year.

The No. 1 player in the sector is Taiwan’s TSMC, which holds nearly half of the market share.

Wednesday’s investment plan was also in line with a government drive to develop Korea’s non-memory chip industry. The country’s largest chipmakers, Samsung and SK Hynix, are big in DRAM and NAND, but relatively weak in the non-memory sector.

President Moon Jae-in addressed the issue in a cabinet meeting last month, urging for immediate measures to modulate the local chip industry’s concentration on memory chips.

Non-memory chips account for 66 percent of the entire semiconductor market, according to the World Semiconductor Trade Statistics.

Their importance is expected to grow with the rise of technologies like 5G, artificial intelligence and connected cars.

“5G and connected cars are nearing commercialization. For both, sensors and technology to send large amounts of data are core factors. Non-memory chips do this job from collecting, perceiving and processing data,” said Daeshin Securities analyst Lee Yeong-han.

“It will take time for voice recognition, wearable and smartphones to be generally accessible,” he continued. “But nonetheless, government policies and private investments to take the lead in future technology are happening [worldwide], with the United States and China at the lead.”

Memory chips are on the down side of a supercycle in which demand constantly rose in the last few years. This golden age was what led semiconductor exports to account for one-fifth of Korea’s entire 2018 exports. With the supercycle over, Korea’s semiconductor exports fell for four consecutive months since last December, with a 16.9 percent year-on-year decline in March.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]