Samsung outperforms TSMC in producing 3nm chips

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Samsung has begun mass production of advanced 3nm chips, and is the first in the world to do so, as it seeks new customers to catch up with its much larger competitor, Taiwan Semiconductor Manufacturer TSMC, in contract manufacturing of chips.

The Taiwanese semiconductor manufacturer is not expected to enter the 3-nm process into mass production until the second half of 2022.

Compared with traditional 5nm chips, the newly developed first generation 3nm process can reduce power consumption by up to 45% compared to its previous 5nm process, while improving performance by 23%, and reducing surface area by 16%.

In the future, the company hopes that the 3nm second generation process can reduce power consumption and size by 50% and 35%, respectively, and increase performance by 30%.

The South Korean company did not name customers for its latest technology, which provides custom chips such as mobile processors and high-performance computing chips.

Analysts said that Samsung itself and Chinese companies are expected to be among the first customers.

Taiwan Semiconductor Manufacturing  Corporation is the world’s most advanced chip manufacturer. TSMC controls about 54% of the global market for contract production of chips. It is also used by companies such as Apple and Qualcomm that do not have their own semiconductor facilities.

Samsung, which ranked second with a market share of 16.3%, announced a $132 billion investment plan last year to overtake TSMC as the world’s top logic chip maker by 2030.

This announcement is a milestone in Samsung’s efforts to compete with TSMC. But it is unlikely that Samsung will be able to make headway against TSMC’s market share until it can demonstrate that the cost-efficiency of the new 3nm process is competitive with the market leader.

Samsung started producing 3nm chips

The chips are primarily being produced for high performance and low-power computing applications. But the company plans to bring it to mobile.

The South Korean company said: We continue to actively innovate in developing competitive technology. We are looking  for new customers in China, where we anticipate high market growth as companies scramble to secure the ability to address the ongoing global chip shortage.

Samsung is the first to produce 3nm chips, but TSMC plans to produce 2nm chips in 2025.

Analysts said Samsung is the market leader in memory chips. But it has been overtaken by TSMC, a leader in  more diversified manufacturing, which makes competition tough.

There are only two types of memory chips. As a result, you can focus on it, increase efficiency, and make more of it. But you can’t do that with thousands of non-memory chips.

The compound annual growth rate of Samsung’s capital spending between 2017 and 2023 is estimated at 7.9%. This compares to an estimated 30.4% for TSMC. The compound annual growth rate of capital spending measures how quickly a company increases its investments.

Samsung’s efforts to compete with TSMC have been hampered by lower-than-expected returns from older chips over the past year. The company said in March that its operations showed gradual improvement.

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