According to sources within Samsung Electronics, the foundry division may return to profitability as early as the third quarter of this year.

Analysts point out that profit growth momentum has gradually strengthened as production of base chips used in advanced 2-nanometer processes and high-bandwidth memory (HBM) increases.

Improved production yield

According to industry insiders on the 8th, thanks to improved production yields and the impact of large orders, Samsung Electronics' foundry division is expected to achieve profitability in the third quarter of this year, a time originally scheduled for the end of this year or next. This will be the division's first performance recovery in nearly four years since it began incurring operating losses of trillions of won in 2022. Observers say that the foundry division, long considered the weak point of Samsung's semiconductor business, is now on a path of structural improvement faster than expected.

Firstly, Samsung Electronics' advanced process nodes have performed better than expected. It is reported that as of the first quarter, the yield of Samsung Electronics' 2nm gate-around-the-all-around (GAA) process has increased to over 60%. Although still below the generally accepted 70% threshold for mass production economics, industry insiders say this yield is sufficient to support initial mass production and expand new customers. In its Q1 2026 financial report released in April, Samsung Electronics stated that "the capacity utilization rate of advanced process production lines has reached its peak." Despite the impact of seasonally weak demand, its revenue still achieved double-digit year-on-year growth.

Customer orders that have been steadily increasing since last year are expected to translate into substantial sales in the second half of the year. Last July, Samsung Electronics signed a long-term 2.28 trillion won contract with Tesla for the supply of autonomous driving chips and plans to begin mass production of its 2nm AI5 and AI6 chips at its Taylor, Texas factory in the second half of this year. Nvidia CEO Jensen Huang announced the "Grok 3" chip, designed solely for AI inference, at his GTC 2026 keynote in March and publicly acknowledged Samsung Electronics as the foundry for the chip.

Order volumes are also growing rapidly. Samsung Electronics expects orders related to its 2nm process to increase by more than 130% this year compared to last year. In addition to Tesla and Nvidia, the company is expanding its collaborations with several major technology companies, including Apple and Nintendo. There are also reports that production of its sixth-generation HBM (HBM4) chip is practically sold out.

With the progress of mass production at the Taylor wafer fab, the fixed cost structure is expected to change soon, improving the cost situation. The Taylor fab, with its massive $37 billion (approximately 54 trillion won) investment, had high construction costs that exacerbated losses in the foundry division. A source familiar with Samsung Electronics stated, "As mass production fully ramps up in the second half of the year, the depreciation effect may translate into a fixed cost dilution effect, significantly improving the profit and loss structure."

Furthermore, the surge in demand for AI accelerators and the near-saturation of competitor TSMC's advanced process lines are also a major boon for Samsung Electronics. Some fabless (chip design) companies are actively considering Samsung Electronics as an alternative, and there are also rumors that AMD is considering a dual-facility strategy for some of its next-generation graphics processors (GPUs).

Source: Compiled from chosun

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