Samsung Electronics Co. has won a contract to manufacture IBM Corp.’s next-generation Power11 data center processors, according to industry sources, marking another win for the South Korean chipmaker’s struggling foundry business.
Samsung will produce the server chips using its 7-nanometer Low Power Plus process with extreme ultraviolet lithography, industry sources said Thursday. The deal also includes Samsung applying its 2.5D ISC architecture packaging technology to boost chip performance.
The contract represents Samsung’s broader strategy of targeting mature semiconductor processes where it can achieve steady yields of 70% to 80%, rather than competing directly with Taiwan Semiconductor Manufacturing Co. on the most advanced nodes. TSMC currently dominates contract chipmaking with limited production capacity focused on cutting-edge processes.
IBM, which ranks among the top five companies in the data center CPU market, has built its niche serving enterprise, financial and high-performance computing customers despite trailing Intel Corp., Advanced Micro Devices Inc. and Nvidia Corp. in overall market share. The Power11 chip promises 99.9999% uptime for data centers and includes quantum-resistant cryptography certified by the U.S. National Institute of Standards and Technology.
Samsung’s 7LPP process, which was the first 7nm technology to deploy EUV lithography in mass production, offers 23% better performance and 45% lower power consumption compared to previous generations, the company has said. The enhanced packaging technology allows multiple chips to be placed closer together in a single package to increase data transfer speeds.
The foundry win comes as Samsung works to diversify its customer base beyond its own chip designs. The company recently secured a $16.5 billion deal with Tesla Inc. to produce artificial intelligence chips at its Texas facility and has been in talks with Nintendo Co. and several Chinese fabless companies for various projects.
Chinese chip designers increasingly prefer Samsung over domestic foundry Semiconductor Manufacturing International Corp. for advanced processes, as SMIC struggles with yield and performance issues on nodes smaller than 7nm, according to industry sources.
Samsung’s foundry business posted a 94% year-over-year decline in operating profit during the second quarter, with low utilization rates at mature production lines contributing to the weakness. However, the company says capacity utilization at its mature node facilities has recently reached peak levels, driven by increased orders for memory interface chips, cryptocurrency mining processors and mobile application processors.
