Samsung Foundry Profitability Improves with 2nm Yield Gains, but Bonus System Hinders Growth

Samsung's foundry business is showing signs of recovery as 2nm GAA process yields improve and orders surge. The company's chip manufacturing arm still faces a long road to profitability, held back in part by its own performance bonus system.

Performance bonuses delay early profitability

Samsung DS head Han Jin-man described performance bonuses as a double-edged sword. The bonuses, which amount to 10.5% of annual operating profit, boost employee morale but delay early profitability. Han stated that the foundry business will find it difficult to turn a profit next year, but expects to record a surplus in 2028.

2nm chip orders have increased by about 130%, according to Samsung. The company is also seeing higher utilization of mature 4nm and 8nm nodes, which is improving overall profitability. However, Samsung remains a backup option to TSMC, and its yields need to reach 70% to compete effectively.

Samsung faces several challenges, including a mobile-centric business structure, insufficient technology maturity, and low-margin orders. The Exynos 2700 presents an opportunity to showcase advanced technology, but Qualcomm's discounts may pose challenges. When we covered the last foundry update, several of the same balance and stability themes came up.

Samsung aims for foundry profitability by 2028. The company is making progress on 2nm yields and order volume, but structural issues and the performance bonus system remain obstacles.