Samsung Electronics, in a move that has exposed the company’s manufacturing issues, has asked ASML Holdings to postpone the dispatch of equipment for its new factory in Texas.
The company has yet to acquire enough customers for its project to make operating the factory worth its while.
The company is desperately looking for customers for its factory that it spent $17 billion building.
The company has sent some of the staff back home to manage the costs associated with the facility.
If it is unable to find customers for its products, it could pose a severe risk to the company’s financial health.
Why is the Taylor city factory important?
Samsung’s chairman Jay Y. Lee wants his company to expand from just a memory chip maker to a full-fledged chip manufacturer.
The chip manufacturing industry is currently dominated by Taiwan Semiconductor Manufacturing Company (TSMC).
Another Samsung competitor, SK Hynix is also currently ramping up production for its AI chips.
This leaves Samsung in a tricky position and at the risk of being left behind as competitors move to dominate emerging technologies.
Earlier this week, ASML’s stock tanked after the chip maker lowered guidance, citing low non-AI demand.
It also mentioned that it expects some delayed revenue because of a few factories that are experiencing delays at their end.
It seems one of those factories was Samsung’s Taylor city facility.
The industry is already expecting the factory to be delayed till 2026.
But if Samsung is unable to bring in volume clients, an asset write-off can’t be ruled out.
Samsung has of course denied these developments and said the return of the staff is a routine rotation.
How hard is it to catch TSMC?
It is hard to imagine that a small country like Taiwan would become the center of the AI revolution.
But thanks to its unique and reliable technology, everyone wants to work with the company.
This over-reliance has become a hotly debated topic in political circles as well. Countries like the US and China rely on TSMC to make vital defense equipment for them.
Both these countries have so far been unable to find alternatives, and Samsung’s development shows why.
Samsung’s market share in contract manufacturing has come down from 19% to 11% in the last 5 years.
Meanwhile, TSMC now controls 62% of the market share. This widening gap is hard to cover, and anyone who has tried is finding out the harsh reality.
Intel is another company that entered the contract manufacturing business in a bid to diversify its business.
The US government also welcomed the move, funding its fabs in the US in a bid to reduce reliance on foreign companies.
But Intel’s story is already known to everyone. The company is crumbling under the weight of its expansions.
Samsung has now delayed further investments in its foundry lines inside Korea. Its 3nm chip production is also facing low-yield issues, another problem that other chip makers have faced in the past as well.
Until other companies find out TSMC’s secret ingredient, it will be hard to take market share away from the chip maker.
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