Samsung recently revealed it earned record-high foundry revenue in the fourth quarter of 2020. That helped the conglomerate’s chip business become its most profitable segment last period.
It also expressed its intent to increase component fabrication income in 2021 by expanding its advanced production capacity.
According to Business Korea, the firm intends to spend ₩35 trillion ($31.2 billion) on semiconductor facilities this year.
Samsung Robust Q4 Chip Revenue
In Q4 2020, Samsung raked in ₩18.18 trillion ($16.2 billion) in semiconductor revenue with ₩3.85 trillion in operating profit. The department’s income spike largely came from strong demand for its memory products, its DRAM modules in particular. Its smartphone personal computer customers had the greatest interest in that type of chip, followed by its data center clients.
However, the firm mentioned experiencing a decline in its components profit because of pricing volatility in the global memory market. It also stated that production line costs eroded the segment’s productivity. In 2020, the conglomerate spent ₩32.9 trillion ($29.4 billion) on capacity build-outs and manufacturing process research.
Although Samsung’s long-term quest to increase its semiconductor revenue impacted its net income in Q4, it also provided some benefits.
The conglomerate’s foundry services brought unprecedented revenue for two consecutive quarters last year. That outcome reflects the expansiveness and advanced nature of its manufacturing capabilities. In 2020, the electronics giant commenced production on a sprawling “total semiconductor” complex in South Korea and launched its first 5 nm products. It also designed a second-generation 5nm component and its first 4nm offering.
Those breakthroughs are crucial because they will make Samsung fabrication services more appealing to chipmakers and original equipment manufacturers (OEMs). The corporation needs that part of its operations to remain cutting-edge because it is crucial to its long-term strategy.
Samsung Anticipates Strong Foundry Market Growth in 2021
Samsung’s Q4 earnings release indicated its semiconductor segment would be the fulcrum of its business in 2021.
The corporation expects to increase mobile device part sales to its existing client base thanks to the 5G boom. It also aims to win new foundry business by expanding production capacity and advancing its manufacturing capability. The firm is pursuing those objectives because it predicts growth within the global foundry market this year.
Similarly, it intends to bolster its IT and mobile communications unit income by making its smartphones more cost-effective and continuing South Korea’s 5G buildout. To do that, it will new to develop more profitable handset and mobile base station parts.
Samsung’s reported plans to spend $31.2 billion on its semiconductor facilities this year make sense given its circumstances.
The corporation needs to maximize its output and advance its nodes to grow its services and products income. Otherwise, Apple will gobble up its share of the premium mobile device market.
In addition, the firm has to ramp up its spending to keep pace with its chief component fabrication rival Taiwan Semiconductor Manufacturing Company (TSMC). The pure-play foundry recently announced it would invest $25 billion to $28 billion on broadening its technological and production resources in 2021. The corporation increased its financial outlay by 47 percent year-over-year to address the massive surge in orders it received in 2020.
For Samsung, increasing its semiconductor-related capital expenditures to a level exceeding Latvia’s gross domestic product (GDP) has become a business necessity.