Intel to Invest US$20 Bil. in Foundry Business

Intel has announced a plan to invest US$20 billion to build two foundry lines in Arizona.

Samsung Electronics has been put on alert as Intel, the world’s largest semiconductor company, has announced a plan to invest US$20 billion to build two foundry lines.

Samsung Electronics announced in April 2019 that it will invest 133 trillion won by 2030 to become the No. 1 player in the system semiconductor sector. The company’s position in the non-memory sector is not as solid as that in the memory sector.

System semiconductors account for 70 percent of the whole semiconductor market, much larger than memory semiconductors (30 percent). This is why Samsung Electronics and Intel are targeting the foundry business, a system semiconductor segment.

Currently, Taiwan’s TSMC is the No. 1 foundry player in the world. According to market research firm TrendForce, TSMC’s share in the world foundry market is expected to reach 56 percent in the first quarter of 2021. Samsung Electronics is trailing TSMC with a market share of 18 percent. It is followed by Taiwan’s UMC (7 percent), the U.S. GlobalFoundries (7 percent), and China’s SMIC (5 percent).

Intel will not be a big threat to Samsung Electronics soon, analysts say. This is because there is a wide gap in technology between the two chipmakers. However, Samsung Electronics may be hit hard by Intel in the long term. Intel’s entry is more threatening to Samsung Electronics than TSMC, the dominant player in the foundry sector.

The market pie will be decreased too. Intel is a major corporate customer in the foundry market. If Intel makes foundry products on its own, Samsung Electronics will face a cut in overall foundry orders. The Intel CEO said in an online press conference on March 23 (local time) that the company will manufacture various chips for mobile devices and secure Amazon, Google, MS, Qualcomm and Apple as its customers. These companies are now major clients of Samsung Electronics.

Intel will employ an investment method similar to that of Samsung Electronics. Intel announced that it will invest US$20 billion to build two factories in Arizona that will be used as foundry production lines. Currently, Samsung Electronics is considering expanding its foundry lines by spending US$17 billion in Texas. The problem is speed. Two months have passed since the expansion discussion began but Samsung is still in a tug-of-war with the Texas government over tax benefits.

Moreover, Intel has a strong supporter: the U.S. government. U.S. President Joe Biden issued an administrative order to examine America’s semiconductor supply chain and provide support for the smooth supply of semiconductors.

“In the end, bold investment and technology development hold the key to the success of Intel’s foundry business. Samsung Electronics will have difficulties in responding properly in the long term because vice chairman Lee Jae-yong is behind bars,” said an industry insider who asked for anonymity.

Meanwhile, TSMC laid out a plan to invest US$36 billion to set up six plants in Arizona. This means that Samsung Electronics has tons of homework to do.