Samsung Foundry is the conglomerate's contract chipmaking arm. It has poured billions of dollars in this division hoping that there would be significant demand from major chip designers, but that demand hasn't materialized. All of this excess and un-utilized capacity has become a drain on the company's resources, forcing it to consider serious options to reduce losses.
A new report claims that after losing nearly a billion dollars in the third quarter of this year, Samsung Foundry has decided to shut down almost 50% of its entire production capacity as there have been no significant new orders from customers.
Samsung Foundry struggling to win orders from major customers
Local South Korean media is reporting that Samsung is temporarily shutting down several production lines at its foundry to reduce costs. Financial analysts estimate that the company lost 1 trillion won, close to $725 million, in Q3 2024 alone. This has forced the company to take drastic cost-cutting measures, and one of the most significant ways to achieve that is to shut down production lines.
The report adds that Samsung has shut down more than 30% of its 4nm, 5nm, and 7nm production lines at the Pyeongtaek Line 2 and Line 3. The shutdowns are reportedly going to be extended to more than 50% of its entire foundry facilities by the end of this year. This will happen gradually as Samsung will continue to monitor customer orders, ensuring that it doesn't found itself in a position where orders come in but the production lines aren't ready to go.
Samsung Foundry has been unable to secure major orders for advanced chips from lucrative clients like Qualcomm, NVIDIA, and AMD, as they continue to prefer TSMC. Qualcomm's new mobile chipset, the Snapdragon 8 Elite, is being produced entirely at TSMC. Much has been said about the 3nm yield issues at Samsung, and some reports have even suggested that this is what has effectively forced Samsung MX to use the Snapdragon 8 Elite across the entire Galaxy S25 lineup.
Ramping the facilities down to a low utilization rates would help Samsung reduce electricity costs and not burn as much money as it already has. The concern remains, though, that if this situation doesn't improve the gap with TSMC could reach a point where it becomes very difficult for Samsung to catch up.
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