Samsung have invested a considerable sum of money into their semiconductor business, having committed to sinking $15 billion into their new semiconductor factory in South Korea over the next couple of years, compared with the industry average of $10 billion. This investment is one example of Samsung's seriousness when it comes to the semiconductor industry, where the company faces stiff competition but is currently the second biggest memory chip and processor vendor after Intel. This financial commitment from Samsung underpins their desire and determination to be the number one semiconductor manufacturer in the world. In the words of Samsung's semiconductor business Senior Director of Foundry Marketing, "It's very important for us to be first. These days, second and third becomes extremely challenging … because from that point on, securing market share is difficult."
Samsung has invested this capital to build a processor manufacturing plant capable of building mobile processors at the 14nm die size, stealing a march over the other foundry manufacturing businesses of Taiwan Semiconductor Manufacturing Co, known as TSMC, and Globalfoundries. TSMC is planning to move into 14nm foundry processes but Samsung has an advantage of approximately six months. In order to get this technological advantage, Samsung pulled out all the stops including skipping a manufacturing step in order to access a more advanced chip manufacturing technology before most rivals.
Rather than adopting a new technology in isolation, it is instead adopting three at once even if this is causing problems with poor semiconductor yields. However, the risks inherent with leapfrogging a technology gap do appear to be working well for Samsung and their boldness has helped them win orders from the foundry market – that is, manufactures hired to build chips for fabless companies such as Qualcomm and Nvidia (fabless companies being those semiconductor businesses without foundries). Industry experts believe that Samsung's progress in this area has won back Apple's business for their mobile products and this is really important, because a shiny new chip factory underutilized is a waste of a lof of capital invested into the plant.
This is important; on Thursday, TSMC projected lower revenue in its current quarter because of tougher competition in the chip market. Samsung's technological advantage represents something of a sea change in the industry; in the words of Gartner analyst Samuel Tuan Wang, "In the last two decades … the most bleeding-edge technology [aside from Intel] was all developed by TSMC and its foundry service. Now for the first time in history, Samsung is beating the schedule of TSMC in process technology by almost two quarters." Samsung has a unique position in the processor market as it designs and manufacturers semiconductors for both its own business and market competitors and it leapfrogged TSMC's 20nm investment. Nvidia has recently added Samsung as a manufacturing partner and industry experts believe Qualcomm is likely to be doing the same. Apple, too, are believed to be using Samsung as a processor manufacturing partner later in the year. Whatever your flavor of smartphone, there's a good chance that your next device will have a processor manufactured by Samsung.