Samsung Chairman Lee Jae yong Visits MediaTek to Secure AI Foundry Orders and Challenge TSMC Dominance Using Bundled Memory Solutions
The recent low profile visit of Samsung Electronics chairman Lee Jae yong to Taiwan, along with his executive team, was largely focused on collaboration in a closed meeting at the MediaTek headquarters with Chief Executive Officer Rick Tsai, as reported in a Digitimes TW. Both companies have been tight lipped about the outcome of their meeting, but industry sources are attributing Samsung's high level trip to an intensified bid to counter the severe market pressures it is facing within the artificial intelligence market.
Central to this push is Samsung's plan to revitalize its loss making contract chipmaking business by adopting a bundled model that plays on its leading strength in the memory market. The contract is essentially conditioned upon the supply of highly demanded parts such as high bandwidth memory and in return, the company locks in wafer production orders. This combined solution has already helped Samsung win contracts for its wafer production with big global companies including Tesla and AMD, and the company now intends to achieve similar success in convincing Taiwanese chip designers.
Increasingly eager to diversify their supply chains, global technology firms are looking to alternative foundries in the face of both capacity concerns for TSMC, and geopolitical risks. The leading firm for contract chipmaking is currently running at full capacity, with Nvidia, Google and Amazon Web Services largely dominating its advanced packaging services, and in response to the demands of these clients in order to overcome the aforementioned bottleneck constraints, Samsung is reportedly making offers such as absorbing some manufacturing costs and a variable pricing strategy in which customers pay solely for the usable silicon, known within the industry as good die pricing.
MediaTek is an extremely valuable client target to Samsung in relation to its advanced process nodes. While MediaTek currently maintains a close relationship with TSMC, it has recently shown interest in developing alternative supply chain partners after agreeing to use Intel for advanced packaging of its Google Tensor Processing Unit orders, and it is on this very opening that Samsung hopes to capitalize by promoting its 2nm and Gate All Around process technologies for high end mobile chips and customized Application Specific Integrated Circuits. Some supply chain adjustments are already evident in other divisions, as Samsung recently reshuffled its supply chain for TV processors to rely 70 percent less on Novatek and allocate the remaining 30 percent of orders to MediaTek instead of the previous 95 and 5 percent respectively.
Despite the enticing offers presented, analysts anticipate the moat of TSMC's manufacturing services to remain strong for the foreseeable future. Neither Samsung nor Intel can compete with TSMC at present in terms of production yield, stability of operations, and scale of advanced packaging. While Samsung may be able to secure trial orders for secondary sources on the basis of its bundled memory offerings and its absorption of manufacturing costs, the primary sources of the chips that power current AI platforms are unlikely to divert from TSMC anytime soon.
