Samsung Electronics

Samsung and Globalfoundries form chip alliance

PUBLISHED : Saturday, 19 April, 2014, 1:09am
UPDATED : Tuesday, 11 October, 2016, 1:04pm

Samsung Electronics and Globalfoundries are teaming up in the made-to-order chip business, an alliance aimed at stealing orders from Taiwan Semiconductor Manufacturing (TSMC).

Globalfoundries will license Samsung's most advanced new chipmaking technology, called 14-nanometre FinFET, giving customers access to production at plants in Texas, New York state and South Korea. Terms of the accord weren't disclosed.

The companies are seeking to pose a bigger challenge to Taiwan Semiconductor, which last year controlled about half of the US$38.9 billion chip-foundry business. Samsung and Globalfoundries are betting the advanced technology and scale they can offer together will help ensure they remain central in the market for building smartphone and tablet parts.

"This offers a huge competitive threat to TSMC and provides an alternative to those companies who are looking to use leading-edge production," said Jim McGregor, an analyst at Tirias Research. "It's a huge deal."

Samsung will reach full production on the new manufacturing technology by year's end, said Jeong Seh Woong, an executive vice-president in charge of the foundry business.

The South Korea-based firm is the world's second- largest chipmaker and has the lead in the new production technology, while Globalfoundries has a broader customer list, and unlike Samsung - which is also the biggest maker of mobile phones and TVs - it doesn't compete directly with potential customers. The alliance may make it tougher for Intel to build a position in the foundry business, McGregor said.

Globalfoundries ranked second in the made-to-order chip market last year, and Samsung was fourth, together generating about US$8.2 billion of foundry revenue, according to market researcher IC Insights. Samsung's main customers for chip-building work are Apple and itself - the company makes parts for its own phone and tablet divisions, McGregor said.

If Samsung and Globalfoundries bring the technology to the market in the time frame they are promising, it could put them at least six months ahead of the competition and tempt multiple chipmakers to give them orders, said Len Jelinek, an analyst at market-research firm IHS.