Samsung Challenges TSMC with Launch of Third-Generation 4nm Process for High-Stakes Battle in Chip Market

South Korean media reports that Samsung is catching up with advanced wafer manufacturing processes, with plans to begin mass production of the third generation 4nm process in the first half of this year. The new process will improve efficiency, power consumption, and chip shrinkage, with the aim of securing orders from major customers such as Qualcomm, AMD, and Nvidia, who currently rely on TSMC (2330). This will intensify the competition between Samsung and TSMC in the battle for orders.

TSMC has already developed the 4nm (N4) process, which is an enhanced version of the 5nm process, and has been in production since 2022. The 4nm technology is used in many areas, including consumer and non-consumer products, and is the biggest revenue contributor for TSMC. In Q4 of last year, the overall revenue contribution of the 5nm family exceeded 30%, reaching 32%. Samsung's efforts to develop advanced wafer manufacturing capabilities, with a focus on TSMC's highest revenue generating process, are aimed at improving power consumption and efficiency. This will make the competition between the two companies even more intense.

Samsung's wafer manufacturing business began production of the first generation 4nm process in 2021, and expanded the monthly production capacity to 20,000 wafers in Q4 2022. Samsung is also deploying its NAND Flash memory manpower to support production. According to a report from BusinessKorea, Samsung's business report released on March 12th revealed that it will begin mass production of the third generation 4nm process in the first half of this year, marking the first time Samsung has specified a production timeline for the subsequent version of the 4nm process.

Compared to Samsung's early 4nm process SF4E, the second and third generations are more efficient, energy-saving, and use less space. Although SF4E chips have been commercialized, yield control has been a major bottleneck, leading Samsung's biggest customer, Qualcomm, to switch orders to TSMC. However, Samsung's 4nm yield rate has improved significantly and is estimated to be around 60%, which is still lower than TSMC's 70% to 80%. Nevertheless, experts believe that Samsung's yield rate is increasing significantly, and subsequent versions are being rapidly mass-produced, making it a powerful tool in the battle for orders.

Currently, the most advanced wafer manufacturing process is 3nm, but the revenue contribution is still highest for the 4nm and 5nm processes. According to market research firm Counterpoint Research, as of Q3 last year, the revenue contribution of 4nm and 5nm wafer manufacturing was highest, reaching 22%, compared to 16% for 6nm and 7nm, and 11% for 16/14/12nm.

TSMC and Samsung are both planning to expand their 4nm production capacity in the United States. TSMC's new 4nm plant in Arizona is expected to start production in 2024, while Samsung plans to establish a 4nm production line at its wafer factory in Taylor, Texas, with mass production expected to begin in the second half of 2024.