Is it wishful thinking for Samsung to outpace Nvidia in AI server processors?

Monica Chen, analysis; Willis Ke, DIGITIMES Asia 0


For the first time ever, Samsung Electronics recently has bluntly publicized that its own AI server processors will surpass Nvidia's, but industry observers said regarding its major customer as an enemy may be a fatal injury to the foundry business of Samsung.

The observers said Nvidia adopted Samsung's 8nm process for its previous generation, RTX 30 series GPUs, but returned to TSMC in the second half of 2022 for fabricating its RTX40 series with 5nm technology, with its A100/800, H100/800 AI GPUs also processed by the foundry giant.

They continued that Nvidia would rather adopt TSMC's high-cost advanced process technology than bow to lower quotes from Samsung, as the latter's technology and yield performance failed to meet the requirements of the US fabless chipmaker.

Now that Samsung has publicly announced it will compete with Nvidia in the arena for AI server processors, it will be even more difficult for the US customer to shift orders to the Korean foundry house, the observers said.

Samsung's top management recently has also admitted that the company now lags 1-2 years behind TSMC in terms of 4/3nm process technology, but reiterated it has the confidence to catch up and overtake the arch rival within five years. The remarks came amid market speculations that Samsung's yield rates for advanced chips have improved significantly and fabless companies like AMD, Qualcomm, and MediaTek are planning to releasing orders to the Korean foundry.

Semiconductor equipment suppliers pointed out that Samsung had claimed it would dethrone TSMC in the near future when it in 2019 announced a US$100 billion mega investment project for its foundry operations that was spun off in 2017 as an independent business. But the reality is its ever-widening gap with TSMC, which has seen its market share risen to 60% from 50% and is ready to start mass production of 3nm mobile SoCs for new iPhones in the second half of 2023.

Samsung took the lead to announce commercial production of 3nm chips in mid-2022, but the company has yet to land big orders from potential customers. This indicates that Samsung lags TSMC not only in manufacturing process technology but also in order-taking ability.

Semiconductor equipment supply sources said Samsung's lower-than-expected yield performance for its 3nm process technology is the key factor behind little patronage from customers, not to mention the more advanced 2nm technology. The sources stressed that customers will not easily risk releasing orders for 3/2nm chips, and Samsung's previous practice of using low prices to attract orders would not work for the advanced chips production.

The sources also noted that Samsung and TSMC are both facing geopolitical pressures while also investing big building plants in the US. But also facing the pressure of US sanctions against China's memory and other chip segments, Samsung, now with a large memory manufacturing ratio in China, is actually in a more precarious situation than TSMC.

At the moment, Samsung records a global foundry market share of around 15%, compared to 60% for TSMC, and the gap can hardly be narrowed unless Apple totally shift its iPhone AP orders to Samsung, market observers said. But the vast majority of 3nm chips orders are in the hands of TSMC, it is a goal highly hard for Samsung to surpass TSMC in market shares within five years, they added.