Samsung Electronics wants to dominate cutting-edge chipmaking

SAMSUNG ELECTRONICS (SE) is a behemoth. The South Korean tech company is the crown jewel of the mighty Samsung chaebol, as the country’s conglomerates are known. It makes more smartphones than any other company in the world, as well as home-entertainment systems and appliances. It dominates the manufacturing of memory chips, which are used to store data on electronic devices and whose price has been pushed up by the global semiconductor shortage. SE’s annual revenues of $200bn are not much lower than those of Apple, the most valuable firm in history, and it is sitting on a cash pile of $100bn.

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Now both SE and its parent group, whose name means “three stars”, are entering a critical new chapter. In August Lee Jae-yong, the scion of the family which founded Samsung in 1938, was released from prison, where he spent two stints after a conviction for his involvement in a bribery scandal. He is finally taking full control of the empire from his late father, Lee Kun-hee, who died last year. Succession was complicated first by the elder Lee’s six-year coma, then by his son’s bribery conviction, linked to SE’s efforts to win the government’s backing for a merger of two Samsung subsidiaries that would cement his control.

Free at last, Mr Lee has grand plans for the company, which he wants to become as dominant in cutting-edge logic chips, used for processing information, as it already is in memory and smartphones. That will pit SE head-to-head with chipmaking powerhouses such as TSMC of Taiwan and America’s Intel, and thrust it into a fierce global contest over one of the world’s most strategic industries.

On October 7th SE confirmed it will manufacture some of the world’s most advanced logic microprocessors, based on its novel “gate-all-around” architecture with transistors measuring three nanometres (billionths of a metre), in 2022. It also surprised analysts by announcing a plan to mass-produce two-nanometre chips from 2025. It is forecast to invest an eye-watering $37bn or so in capital expenditure across its businesses this year. And it is winning new customers, such as Nvidia, an American chip designer, and Tesla, an electric-car maker.

The outcome of Mr Lee’s gamble will have profound consequences—and not just for Samsung. It matters to South Korea, whose president justified Mr Lee’s parole as being in the national interest, given the chaebol’s importance to the economy. And it will influence the global semiconductor industry, the critical nature of which has been underscored by the worldwide chip shortage. To ensure success, the man whom acquaintances describe as shy, decent and astute must also summon a degree of ruthlessness.

SE is a complex corporate creature with a strategic challenge and underwhelming stockmarket performance. It is best understood as divided into two main businesses. The first makes “sets”: smartphones, televisions and household

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