Samsung's 2nm gate-all-around (GAA) process yield continues to improve, and coupled with the recovery of more mature 4nm and 8nm process capacity utilization, it is gradually pushing its wafer foundry business towards a profitable track. However, senior executives in charge of the semiconductor business admitted that the performance bonus system and the mobile business-centered operating structure are becoming important obstacles to turning losses into profits in this business.
Han Jin-man, president of Samsung's DS (Device Solutions) business group, said at a recent meeting for employees that it will be very difficult for the foundry business to achieve profitability next year, and a more realistic time point is around 2028. In his view, with 2nm process orders expected to grow by about 130%, Samsung clearly hopes to respond to long-term doubts about its yield and reliability through mass production of a new generation of process.
However, Han Zhenman pointed out that the factors that hinder Samsung from achieving its foundry profit target as planned go beyond technological maturity, and also include performance bonus systems, mobile phone-centered business structures, low-margin order-taking models, and poor business strategies. He revealed that the amount currently used for performance bonuses accounts for about 10.5% of the company's annual operating profit. This expenditure is slowing down the process of the foundry business getting rid of losses and achieving breakeven as soon as possible.
Despite this, Han Zhenman did not advocate the complete elimination of performance bonuses in order to achieve profitability in advance, but reminded that this adjustment has an obvious double-edged sword effect. In his view, performance bonuses on the one hand motivate employees to increase production capacity and yield, but on the other hand they will erode profits. If they are cut rashly, they are likely to trigger a strong internal backlash, and the gains outweigh the losses.
The wave of artificial intelligence has given Samsung's overall semiconductor business a wave of "turnaround opportunities." Its storage division has returned to a highly profitable state by leveraging strong demand for high-end DRAM and other products. But this part of the profit also aroused concern among employees. The union threatened to launch an 18-day strike, demanding that the company use about 30 billion U.S. dollars in profits as bonuses. The strike once led to a production shutdown before finally coming to an end.
In terms of wafer foundry business, Samsung is still not considered by the market as a first-line option that can compete head-on with TSMC. Instead, it is more regarded by customers as a "spare tire" or backup production capacity, mainly relying on its layout in advanced processes to maintain its presence. To truly win more large customer orders from TSMC, the industry generally believes that Samsung must increase the yield rate of advanced processes to at least about 70% to have a chance to reverse its reputation and customer structure.
Samsung also hopes that the Exynos 2700, which is about to be mass-produced, will become an important window to showcase its top-level process capabilities. It hopes to tell a convincing "turnaround story" with the improvement in performance and energy efficiency of this generation of self-developed flagship mobile chips. However, Qualcomm is said to be working hard to prevent Samsung from large-scale adoption of its own Exynos chips in flagship phones by providing Samsung with a more attractive Snapdragon SoC discount offer, thereby adding another variable to Samsung's wafer foundry profit path.
Overall, Samsung's wafer foundry business is moving step by step closer to its profit target, supported by 2nm yield improvements and demand recovery brought about by AI. However, internal factors such as performance bonuses, business structure and order-taking strategies are making this road longer and more complicated. How Han Jinman and the management strike a balance between motivating employees and improving profits will directly affect whether Samsung can deliver an answer that satisfies the market as planned around 2028.