Samsung: Memory Demand Squeezes Foundry Capacity, Sub-8nm Process Utilization to Exceed 100% by 2027

Samsung's memory business squeezes foundry, 2027 capacity in critical shortage Source: Ban Dao Zong Heng Published: 2026-11-02 10:59 Memory Samsung Electronics generates poster By 2027, driven by AI and HPC orders from leading US customers, combined with "robust memory demand," Samsung's 4nm process revenue will continue to rise.

Samsung Electronics' chip foundry business has struggled for years with insufficient fab capacity utilization. On its third-quarter earnings call, the company said that by 2027, demand for all processes below 8nm will exceed capacity, and capacity utilization for these processes is expected to exceed 100%. A large part of this reversal comes from within Samsung: its foundry is producing logic base dies for Samsung's own HBM4 memory chips, which are currently the company's fastest-growing product.

Samsung does not separately disclose revenue and profit for its foundry business or System LSI (logic chip design division). The performance of the two businesses is combined and reported under the Device Solutions (semiconductor) division. The division reported revenue of 147.1 trillion won and operating profit of 106.5 trillion won this quarter, with profit mainly coming from the memory business. The group's overall operating profit was 107.4 trillion won.

Memory business becomes a core foundry customer

Sukchae Kang, Executive Vice President of the Foundry Business, said that thanks to shipments of 4nm HBM base dies and growth in advanced-process orders from external customers, third-quarter revenue rose quarter-on-quarter and profitability improved significantly. In the business outlook, the memory business was once again highlighted.

Kang said fourth-quarter revenue is expected to achieve double-digit growth both quarter-on-quarter and year-on-year, driven by: new mobile chips using Samsung's second-generation 2nm process; 4nm AI processors (NPUs) for major customers entering mass ramp-up; further expansion of memory-related orders; and business growth with core customers in the US and China.

Kang mentioned that by 2027, driven by AI and high-performance computing (HPC) orders from leading US customers, combined with "robust memory demand," 4nm process revenue will continue to rise.

Base dies are the bottom logic layer of the HBM stack; starting with HBM4, they shift from a memory process to a foundry logic process. A foundry business executive said that this 4nm base die, jointly developed with the memory division, gives Samsung "industry-leading HBM4 performance" and industry-leading base die yield, "even though we are still in the early stages of mass production." Samsung is also developing a next-generation base die optimized for AI memory.

2nm orders continue to increase, yield optimization still underway

The foundry business has also made progress in expanding external customers for advanced processes. In the third quarter, Samsung won more 2nm projects from major cloud providers and AI/HPC customers, and expects the number of 2nm projects in 2026 to more than double from last year. The company said HPC will account for more than 50% of total foundry sales, but did not give a specific timeline.

Samsung hopes to consolidate its relationships with these customers. A foundry executive said Samsung plans to establish strategic partnerships with major advanced-process customers based on long-term agreements, consistent with the memory division's approach of multi-year supply contracts.

This outlook comes with two risk warnings. Kang said Samsung is still stabilizing 2nm yield; although orders continue to increase, the process is not yet fully mature. The new 2nm orders will also not immediately translate into revenue: new 2nm products for leading customers will begin mass production in the second half of 2027. Regarding 1.4nm, Samsung said it has held discussions with multiple customers and is finalizing a test chip plan with one of them. The new generation of 2nm will rely on DTCO (design-technology co-optimization) to improve performance and energy efficiency.

For mature processes, Samsung is phasing out low-margin processes without orders and focusing resources on: 5nm automotive chips; 8nm orders from a leading major customer; 14nm memory interface chips; and 17nm image sensors.

At the same time, Samsung is expanding capacity for silicon photonics and high-capacity silicon capacitors, and is said to have received volume supply requests for capacitors from several major customers.

Taylor fab steps up preparations, Samsung evaluates additional capacity

Samsung revealed that cleanroom work has begun at its Fab 1 in Taylor, Texas, with equipment being installed and test wafers running to tune the line, and that professionals have been dispatched from its Korean headquarters. The project is on schedule, and the fab will begin production in 2027. Foundry capital expenditure rose this year, mainly directed to the Taylor fab.

As demand for advanced processes is growing faster than capacity expansion, Samsung said it is considering additional investment in both the US and Korea, including building new fabs and expanding advanced packaging capacity, while also expanding 8nm, 4nm, and 2nm capacity.

Memory boom squeezes System LSI business

The memory upcycle that is driving the foundry business's recovery is putting pressure on System LSI. Jason Shin, Executive Vice President of System LSI, said phone makers raised prices to cover higher component costs, and demand for mobile and IT devices weakened in the third quarter. However, thanks to shipments of new Exynos processors and 200-megapixel image sensors, System LSI revenue still grew. Shin expects the mobile market downturn to continue into 2027: the smartphone market will contract overall, and phone makers will reduce launches of mid- and low-end models.

Samsung's response is to reduce reliance on its own phone chip business. Shin said System LSI has reached cooperation and won projects with several new custom chip customers. Samsung pitches a one-stop capability to such customers: it can simultaneously handle chip design, wafer foundry, memory support, and packaging. Development of the flagship Exynos 2700 is on schedule, and the image sensor business also plans to expand beyond the phone market.

Overall, the current shortage cycle that is boosting Samsung's memory profits has now also filled the foundry's capacity through base dies and memory-related orders. But at the same time, the phone market on which System LSI depends is contracting.

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