Capacity utilization may reach 100% within the year, Samsung Electronics' foundry business approaches profitability turning point

Odaily reported that Citrini analyst jukan said on the X platform that Samsung Electronics' foundry division is expected to reach 100% capacity utilization in the second half of this year. Current capacity utilization is estimated at 70% to 80%. With order backlogs and progress in contract negotiations, both internal and external parties at Samsung believe the target is essentially assured. The division has been in a depressed state with capacity utilization below 50% since 2024, and after about a year, it is approaching full operation, with signs of a turning point in its long-term loss-making structure. 

Industry sources say that the rise in capacity utilization is driven by high-bandwidth memory (HBM) base chips and growing demand for advanced products centered on major US Big Tech clients. With 4nm applied to the sixth-generation HBM, namely HBM4, memory market momentum is directly boosting foundry capacity utilization. Meanwhile, 2nm orders from major cloud service providers and AI and high-performance computing clients are expanding, and project discussions with major customers such as Broadcom are ongoing. 

Customer diversification is also progressing. Samsung's foundry business has long been criticized for relying on specific customers, but recently, Big Tech companies such as Qualcomm, AMD, and Google have begun participating in negotiations. Tesla is also reportedly placing its next-generation chip orders with the 2nm process, driving the expansion of the mid-to-long-term order pipeline. However, the market generally believes that converting these orders into actual mass production contracts requires 2nm yield to stabilize in the 70% range; the current yield is estimated to be in the 60% range, and the pace of subsequent improvement is a key focus. The business structure is also being adjusted. Revenue from advanced processes is expected to exceed 50% this year, and the share of AI and high-performance computing revenue is expected to expand from nearly 20% last year to over 30% this year. In the second half of the year, mass production of second-generation 2nm process SF2P mobile products will begin. Texas Taylor Fab 1 is preparing to start operations this year as planned, and Taylor Fab 2 will break ground within the year, targeting mass production by 2030. As customer inquiries for the 1.4nm process increase, Samsung is also evaluating additional wafer fab plans. 

At its second-quarter earnings call on July 30, Samsung said capacity utilization across all nodes improved year-over-year, and advanced nodes at 8nm and below have achieved the highest levels by focusing on high-growth demand products. Samsung expects the number of 2nm project wins this year to more than double from last year. Regarding the timing of returning to profitability, Samsung said it is difficult to specify an exact timeframe but indicated it should be achievable in the near term. Analysts expect non-memory businesses, including foundry and System LSI, to turn profitable as early as the third quarter and no later than the fourth quarter. Some analysts believe that if wafer price increases are combined with the normalization of capacity utilization, the pace of profitability improvement could be faster than market expectations. There is also industry opinion that, compared with reaching 100% capacity utilization, whether 2nm yield can exceed 70% is the true threshold for major customers such as Qualcomm and AMD to place comprehensive orders.