The two businesses are costing Samsung ‘billions’ according to analysts, in part due to weak demand, and consequently have been seriously impacting the company’s overall financial performance.
Since 2019, when Lee announced plans to better compete with TSMC – in fact he was looking to overtake the Taiwanese market leader by 2030 – the company has been investing in and expanding into logic chip designing and contract chip manufacturing.
According to Lee, the company wants to lower its reliance on memory chips and has expanded into logic chips which are used to process data, and where demand is booming on the back of the growth in artificial intelligence.
The company has also announced billions of dollars of investments in contract chip manufacturing and is in the process of building new plants in South Korea and the United States, although new facilities are being delayed and those openings are set to be better aligned with customer demand.
However, as reported by Reuters, Samsung has struggled to win big orders from customers to fill up the new capacity. It’s not alone in that struggle, you just have to look at Intel and the costs it too has incurred as it looks to compete with TSMC.
Despite that Lee told Reuters that there were no plans to spin-out either its logic chip design business or its chip manufacturing business, despite the costs of both.
Last year, Samsung posted an estimated operating loss of $2.4 billion from the foundry and System LSI businesses. Those estimates were provided by analysts as Samsung doesn’t breakdown the performance of the two units.
Analysts are estimating similar losses for 2024. It’ll be interesting to see how big those losses are and whether Lee’s commitment to his business units remains as solid as it currently appears.
