UPDATED. 2024-06-21 07:30 (금)
Can Samsung recover its position as a leader in chips?
Can Samsung recover its position as a leader in chips?
  • Noh Tae Min 기자
  • 승인 2024.05.22 08:15
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Tech giant swaps head of chip unit
Failure to take in HBM the cause
Samsung's chip business unit had performed poorly last year Image: TheElec
Samsung's chip business unit performed poorly last year Image: TheElec

Samsung’s semiconductor business unit had a difficult time for the past year.

The unit, called the Device Solutions (DS) division, recorded 15 trillion won in operating loss last year, its worst performance ever.

This contrasted with its performance in the prior years, where it would earn 30 trillion won in operating profit a year, being the cash cow the conglomerate.

It recorded four operating losses for four straight quarters last year, also a first. Even with consideration to the global chip downturn, it is a black mark for Samsung.

Its technology leadership has also been questioned. Some believe it has no lead over rivals SK Hynix and Micron in traditional memory chips.

In high-bandwidth memory (HBM), it is actually playing catch up to SK Hynix. Despite these developments, few months ago Samsung claimed it was the No.1 in the industry.

All these added up to Samsung’s sudden announcement on Tuesday in which it replaced its head of the DS division. This is an exceptionally rare move. Occasionally Samsung would make minor appointments during mid-year outside of its year’s end reshuffle. But rarely for a division head, if ever. 

Samsung named vice chairman Jun Young-hyun as the new chief executive of the DS division. The outgoing division head Kyung Kye-hyun was named as head of future business planning. In form, this is a reshuffle but it is effectively a firing. Sources said Kyung tethered his resignation to take responsibility for recent developments. To most of those in the DS division, his replacement came as a shock due to the timing.

New head Jun started his career at LG Semiconductor and joined Samsung’s Memory Business in 2000. He worked as development head for DRAM and NAND and also headed strategic marketing at the business unit. He became the head of the Memory Business in 2014 and led the unit until 2017 when he was reassigned to the CEO post at Samsung SDI. He was named the head of future business planning earlier this year.

Prior to Jun’s appointment, there has been a sporadic reshuffle of lower executive posts in the past year. In July last year DS division named a new DRAM development head as well as a new CTO for Samsung Foundry. The CTO was changed again in December, only after five months. These appointments were considered warnings by the leadership to the DS division. Now even the CEO has been renamed.

The new DS division head Jun Young-hyun is a DRAM expert. Image: Samsung
The new DS division head Jun Young-hyun is a DRAM expert. Image: Samsung

Samsung called its recent move a preemptive measure to increase the future competitiveness of its semiconductor business. It was done to renovate the division. 

The main culprit is likely HBM. Samsung was the leader in the HBM market up to HBM2E. However, it lost its market share to SK Hynix in HBM3. According to market tracker TrendForce, last year, SK Hynix held a 53% market share in HBM, followed by Samsung’s 38%. Micron controlled 9%. SK Hynix has Nvidia as its customer, while Samsung has AMD, Amazon Web Services, and Rebellion.

Another cause is that Samsung is no longer ahead in terms of technological sophistication in chips. The company was always over a generation ahead in conventional memory chips. This allowed it to launch new products first and drive down costs faster than its rivals. But this gap has also narrowed.

For example, Micron launched its 10-nanometer (nm) 1a DRAM ahead of Samsung in 2021. In 1b DRAM, Samsung is level with its two rivals. In the past, the tech giant had a lead of at least a year or a year and a half in terms of technology. This led to Samsung announcing that it was reducing its production output last year. This is despite Samsung executive chairman Lee Jae-yong previously saying the firm won’t lower its production output.

In foundry, or contract chip production, Samsung has been locked in as the runner-up to TSMC. TrendForce said in the fourth quarter, TSMC had a 61.2% market share, while Samsung had 11.3%.

Jun has many challenges to overcome. His vision for a renovated DS division is expected to be clearer in June when Samsung is expected to commence additional reshuffling for the chip unit, sources said.

The most important goal will be to pass Nvidia’s quality test for HBM. Sources said Samsung’s 8-stack HBM3E is yet to get the OK from the GPU maker. Nvidia is the largest maker of AI chips right now, so securing it as a customer is a must for Samsung. Kyung was a NAND expert while Jun is a DRAM expert, a source familiar with the matter said, and Jun’s first mission will be to increase the company’s HBM competence.

His second mission is to secure a large customer for foundry. Samsung is yet to secure a meaningful customer for advanced nodes of 7nm node and below. Intel has joined the foundry market again and the US chipmaker is already contacting Samsung’s own partners in the sector.

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