Samsung Falls Behind While Leader Remains in Jail

      June 08, 2021 13:26

      U.S. memory chipmaker Micron announced that it has started producing 14-nanometer DRAM chips for the first time in the world. That is even smaller than Samsung's 15-nm chips. In November of last year, Micron stole a march on Samsung by announcing commercial production of 176-layer NAND flash memory chips. Why is Samsung, for 20 years the world's top chipmaker, falling behind?

      Since Samsung succeeded in manufacturing 256-megabyte DRAM chips in 1994, Korea had remained as the world leader in memory chip technology. Samsung set milestones by developing a 1-gigabyte DRAM chip in 1996, 1-gigabye flash memory chip in 2001, 64-gigabyte DRAM in 2007 and 128-layer NAND flash chip in 2019, following Moore's Law that memory capacity doubles every two years. As a result, Samsung clinched an overwhelming 70-percent share of the global DRAM market and 45 percent of the global NAND market. Together with Taiwan's TSMC, which dominates the foundry market, it became one of the top two suppliers of memory chips in the world.

      But the dawning of the AI, autonomous driving and 5G era and the U.S.' semiconductor alliance strategy have begun to rattle the foundations of the global industry. From now on, demand for custom-made semiconductors is expected to outpace demand for wide-use chips. Samsung spotted this trend early enough and two years ago announced a 10-year plan to invest W133 trillion to bolster its system semiconductor and foundry businesses (US$1=W1,113). But that plan has yet to take off while TSMC's dominance continues to grow. The global foundry market increased 25 percent last year and TSMC's share of the pie surged to a record 54 percent while Samsung's remains flat at 17 percent.

      Now Samsung is being threatened by Micron. Samsung's DRAM market share fell from 47 percent in 2016 to 42 percent last year even as Micron's rose from 23 percent to 26 percent. In the first quarter of this year, the operating margin of Samsung's semiconductor business stood at 18 percent but Micron's reached 20 percent. Thanks to widespread support from the U.S. government, Micron is expected to go from strength to strength.

      On top of that, TSMC has announced plans to build six more chip factories in the U.S., lured by U.S. President Joe Biden's siren call. Samsung has still not realized plans to build more plants in the U.S. Even Japanese chipmakers, who were outpaced by their Korean rivals 30 years ago, are aiming for a resurgence by joining hands with TSMC. But while all this is happening, Samsung chief Lee Jae-yong remains in jail, and his absence from day-to-day leadership is delaying the formulation of growth strategies and investment plans. Holding him in prison is tantamount to harming the nation's interests.

      • Copyright © Chosunilbo & Chosun.com
      Previous Next
      All Headlines Back to Top