Samsung Open To Mobile Chip M&A, Sees Foundry Deals

Samsung is open to acquisitions to grab a bigger share of the booming mobile processor market, and is expecting to win more chip manufacturing deals in the next two to three years. The South Korean company is the world’s biggest maker of memory chips but it lags far behind in the non-memory chip processor business dominated by the likes of Qualcomm, Texas Instruments and Broadcom.

“We constantly study the market and try to determine what the best is and there’s absolutely no reason why we want to avoid doing M&A,” Wong Yiwan, Vice President of Samsung’s system chip business, told Reuters. “By the same token, we do other things that actually complement what we do- clearly things like partnership. It’s very difficult for one company to do everything.”

Samsung had been reportedly interested in buying Infineon’s wireless chip unit, which Intel snapped up instead for $1.7 billion last year. Its system chips division saw strong growth last year, driven by robust demand for mobile processors and image sensors, but an organic-growth approach kept its global share in an exploding mobile chip market at around 3 percent, according to research firm iSuppli. The business also represents around 20 percent of Samsung’s overall semiconductor business. Its mainstay memory chip operation, ranked the world’s largest, earned 20 trillion won in revenue in the first nine months of 2010. While still small in comparison, the division is expected to help offset weakening growth in memory chip demand, helped by rising popularity of smartphones, tablets and Internet TVs.

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Wong also expects to secure more outsourcing deals for chip manufacture in coming years, as belt-tightening companies shed capital-intensive investment in chip-making facilities. Samsung said last month it had won a deal from Japan’s Toshiba Corp to produce system chips, as the Japanese firm seeks to reduce its non-memory chip exposure. “Our foundry business is doing very good. Many companies are adopting fab-light strategy. So demand for foundry service support has become stronger, and we actually benefit from that,” Wong said. “Clearly, expansion in foundry is our major focus. So the next two, three years, you’ll probably see more relationships being set up between our company and other companies on the foundry side.”

Samsung trails Taiwan’s TSMC and UMC, the world’s the two biggest foundry chipmakers, but its aggressive investment plan is improving its ability to churn out large numbers of high-performance chips at low cost. Revenue from foundry chipmakers, which produce chips on behalf of companies such as Texas Instruments, Qualcomm and Nvidia, is estimated to have grown by 42 percent in 2010 to $28.9 billion and reach $33.7 billion in 2011, according to research firm iSuppli.