Not only selling the most smartphones in the world, how did Samsung rise to become the second largest chip manufacturer in the world?

Samsung is present everywhere, from phones and smart TVs to refrigerators and washing machines. Company representatives said their products can be found in nearly three-quarters of American households, according to CNBC.

But gadgets and home appliances aren’t the only drivers of Samsung’s rise to become one of the world’s most valuable companies. It is the world’s second-largest chip maker and plays an important role in power supply.

For more than three decades, Samsung has been the leader in memory chips, but it’s still not immune to last year’s market turmoil. The dismal memory chip prices caused the company to record unsatisfactory first-quarter results, while profits fell to their lowest level since 2009. Samsung responded by cutting production. Other small players like Micron have expected to lay off 15% of the workforce.

Amidst the ruins, this giant company still finds room for growth. It is building a $17 billion chip factory in Taylor, Texas, and is promising to start manufacturing the first advanced chips in the United States next year. At home, the company is also improving capacity and spending $ 228 billion on 5 large and small chip factories, expected to go into operation in 2042.

“They’re spending a lot,” says Dylan Patel of research and consulting firm SemiAnalysis. “Why? Only then can they catch up with technology and continue to maintain their leading position.”

According to CNBC, Samsung is one of the three most advanced chip companies in the world – behind TSMC and ahead of Intel. The company is now aiming to catch up with TSMC in the future.

“We don’t want the No. 2 position. Samsung is never satisfied with this position,” said Jon Taylor, Samsung’s vice president of factory engineering, adding that the company is pursuing growth. triple production capacity by 2025 and reduce memory chip size to 1.4 nanometers by 2027.

“If Samsung hits the target, they’ll overtake TSMC, but it’s a pretty big challenge,” Patel said.

Reportedly, a CNBC reporter recently visited Samsung’s Austin chip factory, and had the opportunity to interview the head of the memory chip business in the US: Jinman Han.

“We really want to be the foundation for American industry,” Han said.

In fact, Samsung started its operation 85 years ago as a trading company exporting fruits, vegetables and fish in Korea. “The founder’s vision was that the company would last and stay strong. He decided to choose the name Samsung, which means three bright stars,” Han confided.

To survive the two major wars, Samsung continued to diversify production into other areas such as textiles and retail. Samsung Electronics, which was founded in 1969, released its first TV in 1972. Two years later, Samsung also acquired Hankook Semiconductor to strengthen its position.

Samsung opened its first office in New Jersey, USA in 1978. By 1983, the company successfully produced 64KB chip (DRAM) commonly used in computers. The company then also opened a new office in Silicon Valley.

Lee Kun-hee came to power after his father’s death in 1987. Samsung’s first mobile phone came out a year later and it is now the world’s largest smartphone vendor.

Just a decade after producing the first memory chip, Samsung brought to market a new version with 1,000 times the capacity, then internationally acclaimed in 1992 with the first 64MB DRAM chip. The company began manufacturing chips in the US in 1996 in Austin, Texas, then went on to inaugurate a second factory in 2007.

In 2018, Samsung ended a seven-year legal battle with Apple over the question of whether it copied iPhones.

“Apple has received a compensation from Samsung. Legally, Apple wins,” Cain said. “However, when you add up all the costs that year, neither side wins.”

That’s not the only challenge. During the pandemic, Samsung was hurt by a global chip shortage, demand peaked, and supply chain disruptions. “It really hurt,” Han said. “Customers need it, but you can’t provide it.”

However, that dynamic is changing after consumers reined in spending due to inflation. “The market is likely to recover by the end of the year,” said Han.

According to CNBC, Samsung shares are up 28% this year and hit a record high on June 5 on the Korean Stock Exchange. Morgan Stanley recently ranked Samsung among its top investment picks.

In May, China’s ban on Micron products gave Samsung stock momentum. Samsung said it will improve capacity in Taylor, Texas, northeast of Austin due to strong US demand.

“This will increase Samsung’s ability to supply memory chips domestically,” said Jon Taylor.

Over the past three decades, the US share of global chip manufacturing has plummeted from 37% to just 12%. This is partly due to the fact that the cost of building and operating a new factory in the US is at least 20% higher than in Asia.

“The CHIPS Act is helping us close the gap in construction costs,” Taylor said.

According to experts, chip production will be cheaper in the US if more companies in the supply chain expand their operations. Reportedly, Intel is building many new large factories in Arizona and Ohio; while TSMC is spending $40 billion on new chip plants in Arizona. With 17 billion USD invested in Taylor factory, Samsung will spend 11 billion USD on machinery and equipment.

According to CNBC, the device Samsung brought to Taylor was probably a $200 million EUV lithographic printer made by ASML. They are the only devices in the world that can produce advanced chips with high perfection and precision.

However, each EUV machine will consume about 1 megawatt of electricity, which is 10% higher than other machines. Research shows that Samsung used more than 20% of Korea’s total solar and wind capacity in 2020.

“Electricity is the lifeblood of a semiconductor factory. Outages mean companies lose a lot of months of production,” said SemiAnalysis’s Patel.

According to CNBC, Texas’ energy grid is not really stable. In 2021, the power grid will also be damaged by storms, leaving millions of people with many hours without electricity.

“I signed 12 laws to make the grid more resilient and secure,” Texas Governor Greg Abbott told CNBC. “We’re making sure that any business that moves here will be able to access low-cost electricity.”

Water is also an important ingredient in every chip factory. In 2021, Samsung used about 38 billion gallons of water to make chips. Meanwhile, about 80% of Texas is still affected by drought.

“We’re going to try to make sure that not only people but also businesses have enough water to drink,” Abbott said.

Samsung aims to reuse more than 1 billion gallons of water by 2023. At the new Taylor plant, it aims to reuse more than 75% of used water.

Recently, artificial intelligence technology caused a fever. They require more powerful, faster processors, which poses many challenges for Samsung.

“There are more and more competitors around the world that can make memory chips,” Cain said. “To stay ahead of the game, you have to adopt new technologies that are more logical.”

When asked about its next plans, a Samsung representative said the company planned to improve production capacity at a 1,200-acre site in Texas.

Reference: CNBC