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South Korean technology and electronics giant Samsung detailed plans to spend around $116 billion through 2030 to ramp up its role in the semiconductor space, reports Bloomberg.
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The company is already the market leader in memory chips, which are a necessary supporting component for any computing device. Samsung’s new semiconductor investment is aimed at replicating or at least approaching that dominance in the logic chips space, the main processor that provides the "brains" of computers and smart devices, such as mobile phones, servers, smart appliances, and small IoT sensors.
Here’s what it means: Samsung is attempting to take on the likes of Qualcomm and Intel, as well as third-party semiconductor manufacturers like TSMC, with its costly chip plans.
- The pledge to invest $116 billion in microchips in just over a decade seems extreme, but developing the facilities to match the companies Samsung is targeting is an expensive prospect. Establishing a production facility to create effective low-power microchips is a costly venture, with each foundry running between $10 and $20 billion depending on the technology being employed — and that’s before the expenses Samsung would incur in research and development. These facilities aren’t one-time investments, either, as they need to be almost completely retrofitted when new, more efficient production technology is developed. The cost of such an overhaul could again run into the billions.
- The logic chip market is set to be a steady area for growth, and it could prove lucrative for Samsung to tap. Samsung was the top global smartphone vendor in 2018, according to IDC, shipping about 21% of all phones. If the company can become its own primary logic chip supplier, it could effectively earn revenue from itself, as its phone segment could buy from its chip segment instead of from a third-party supplier, for example. The effect would be compounded if it branches out to supplying logic chips to other mobile companies. With the anticipated growth of IoT devices in the coming years — Business Insider Intelligence forecasts there will be 64 billion such devices in use worldwide by 2026 — Samsung could have ample opportunity to cement itself as a key global chip supplier.
The bigger picture: The capacity to design purpose-built chips and specialized hardware to meet the various demands being placed on its products in myriad industries can give Samsung a versatility that’s nearly unmatched in the tech world.
Samsung is already one of the leading companies in the technology space, and it also has its hands in a range of other areas of the IoT, including the car (thanks to its acquisition of Harman) and its legacy appliance business.
Between these segments, it has the potential to provide smart devices for nearly every aspect of a consumer’s daily life, supplying both the hardware and the supporting software and AI.
The challenge for Samsung will be to rapidly develop a logic chip unit to supply capable hardware to its devices, as the likes of Intel and Qualcomm have been at it for decades. Samsung should look to Apple’s success with its A-series of mobile phone microchips as an example of rapid hardware development.
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