Samsung's Top Boss: No Spin-Offs for Chip Businesses

Last week, rumors suggested that Samsung might spin off its contract chip manufacturing business. However, the company's CEO, Jay Y. Lee, has laid these rumors to rest. Speaking to Reuters, Lee confirmed that neither the foundry business nor the logic chip designing business will be spun off. Instead, Samsung plans to expand these businesses further. Lee's comments come as a surprise, given that both businesses have been struggling. In 2019, Lee had ambitious plans for Samsung Foundry to outpace TSMC by 2030. Despite investing billions in new factories in South Korea and the U.S., Samsung couldn't secure enough orders to utilize the new capacity. TSMC currently leads the market with a 61% share, while Samsung Foundry trails at 14%. Both chip manufacturing and designing for others have not been profitable for Samsung lately. Weak demand has led to significant losses—an estimated 3.18 trillion won ($2.4 billion) last year alone.

Lee also addressed the challenges facing their new U.S. chip manufacturing facility in Taylor, Texas, blaming political changes and elections. Similar problems are occurring in South Korea with production yields for advanced 3nm chips well below expectations. Analysts estimate that the combined operating loss for the chip manufacturing and logic chip designing businesses this year will be 2.08 trillion won ($1.54 billion). Despite these setbacks, Lee remains focused on growth rather than a spin-off. Back in 2017, Samsung separated the foundry and logic chip design businesses due to customer concerns about confidentiality. Professor Lee Jong-hwan from SangMyung University argued that splitting the foundry would build customer trust and improve focus. However, he also cautioned that the foundry might struggle as a standalone business without Samsung’s profitable memory chip support.

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