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Samsung starts construction on cutting-edge chip production line

Sixth domestic chipmaking facility will enable South Korean firm to compete with bigger rival TSMC

Seoul

SAMSUNG Electronics Co Ltd has begun work on a sixth domestic contract chip production line, the company said on Thursday, to make logic chips for mobile phones and computers as it looks to cut reliance on the volatile memory chip sector.

The South Korean firm is taking on bigger rival Taiwan Semiconductor Manufacturing Co Ltd (TSMC) in the contract manufacturing business, where it competes for orders from customers such as Qualcomm Inc and Nvidia Corp.

The company said it has started construction on a 5-nanometer fabrication facility in Pyeongtaek, south of Seoul, dedicated to its made-to-order foundry business, an arena TSMC dominates. Samsung now operates five foundry lines in South Korea and one in the United States.

Its statement on Thursday coincides with the announcement of restrictions on the sale of semiconductors made with American gear to China's Huawei Technologies Co., a constraint that threatens more than a tenth of TSMC's business.

"This will enable us to break new ground while driving robust growth for Samsung's foundry business," ES Jung, head of the contract chipmaking division, said in a statement.

Based on the Extreme Ultraviolet Lithography or EUV process, Samsung expects the fab's output to go toward applications from 5G networking to high-performance computing from the second half of 2021, it said in a statement.

Samsung first unveiled its expansion blueprint in April 2019, outlining at the time its goal of hiring thousands and ramping up investment in logic chips in the years leading up to 2030.

That initiative arose as sales of smartphones and consumer electronics plateaued and competition from Chinese rivals depressed margins.

EUV is the latest and most advanced chipmaking method, requiring machines costing tens of millions of dollars and delivering better precision and performance in the chips it produces.

TSMC and Samsung, through its spending plan, are the leaders in developing that process and expanding into 5nm and smaller manufacturing nodes.

"This is Samsung's effort to narrow the gap with TSMC, as it still lags behind TSMC in the contract chip making market," said Park Sung-soon, an analyst at Cape Investment & Securities.

TSMC, the world's biggest contract chipmaker, plans to build a US$12 billion factory in the US state of Arizona, it said last week.

Before the arrival of Covid-19, Samsung had begun collaborating with major clients on designing and manufacturing custom chips and that work was already starting to add to its revenue, a Samsung executive has said.

This month, President Moon Jae-in said he aimed to nurture the non-memory industry in his agenda to foster economic growth.

South Korea's chip exports for the first 20 days of May soared 13.4 per cent, while exports of mobile devices and cars collapsed 11.2 per cent and 58.6 per cent respectively, customs data showed. BLOOMBERG, REUTERS

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