As the Red Queen told Alice:
My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.
Samsung, probably the best-known brand in the world when it comes to smartphones, may be in that very position. Android Headlines reports that Samsung is facing challenges that threaten its leadership across several key areas. Despite being a major player globally, the company is now grappling with pressures that could impact its position. In response, Samsung’s CEO has urged employees to work hard to improve the quality of its products.
The difficulties are largely due to issues in Samsung’s semiconductor (SoC) and memory chip production. Samsung Foundry, responsible for making SoCs, has been struggling with low efficiency in producing high-performance chips.
Reports indicate that Samsung’s 3nm chip manufacturing has a yield rate of less than 30%, and sometimes as low as 10%, making it costly to produce these chips.
As a result, Samsung decided not to include the new Exynos 2500 chip in its upcoming Galaxy S25 series. Despite efforts to resolve these issues, the launch of the Galaxy S25 is too soon for significant changes. Samsung remains hopeful, however, that this chip will be ready for future Galaxy models from the folding series (Galaxy Z Fold and Z Flip).
Another challenge is the reduced demand from key clients, with companies like Qualcomm and Nvidia turning to TSMC, one of Samsung’s main competitors, due to ongoing production issues.
In the area of memory chips, Samsung’s HBM (high-bandwidth memory) chips are also lagging behind competitors, impacting Samsung’s ability to meet the needs of companies producing AI-driven technology. Big industry players such as AMD, AWS, Intel, and Nvidia are choosing other suppliers for their AI chips.
During Samsung’s 55th anniversary event, CEO Han Jong-hee emphasized the importance of technology and quality to the company’s success.
He called for renewed efforts to maintain Samsung’s leadership, saying that achieving unmatched quality and innovation is critical to staying competitive. Han also encouraged the company to explore new areas beyond its current products.
Nothing new under the sun
Qualcomm turned to TSMC and waved goodbye to Samsung. | Image credit – Qualcomm
Samsung Foundry faced challenges with its smartphone SoC production in early 2022 when it reported a low yield of 35% for the 4nm Snapdragon 8 Gen 1 processor.
This means that out of every 100 chips produced, only 35 passed quality control, and Qualcomm, which relied on Samsung to manufacture the chipset, had to pay for these defective chips.
Due to these poor yields, Qualcomm quickly switched to TSMC, a competitor with a much higher yield of 70%, to produce the Snapdragon 8+ Gen 1, and it has remained with TSMC for subsequent chips.
As both TSMC and Samsung prepare to start mass production of 2nm chips next year, TSMC plans to implement advanced technology for their transistors, which Samsung already uses in its 3nm production.
However, Samsung’s yield issues persist, with reports indicating a low yield of just 10-20% for its 3nm chips, which is inadequate for meeting demand.
TSMC holds a significant advantage in the market, controlling 62.3% compared to Samsung’s 11.5%. Although Samsung has decided to rely on TSMC for the upcoming Snapdragon 8 Elite chips for its Galaxy S25 series, this choice comes at a high cost, with Qualcomm’s price hike for the chipset.
To avoid paying these high prices for future chips, Samsung needs to enhance its yield rates. Meanwhile, MediaTek, the largest smartphone chipset supplier, has hinted at offering Samsung competitive pricing to use its Dimensity chips in flagship models if Samsung cannot improve its production yields.