How Samsung became the world’s No. 2 advanced chipmaker and set the stage for a U.S. manufacturing boom

Published

2 years ago

June 9, 2023

admin

Samsung’s brand is everywhere. From Galaxy phones and smart TVs to washing machines and refrigerators, the company says its products can be found in nearly three-quarters of U.S. households.

But Samsung is much more than gadgets and appliances, and there’s another reason why it’s one of the world’s most valuable companies. It’s the second-biggest maker of chips that are powering so many popular devices.

For more than three decades, Samsung has been a leader in memory chips, which are used for digital data storage. But that’s been a market in turmoil. Over the last year, prices for memory chips have taken a dive, and they’re expected to fall up to 23% more in the current quarter. In April, Samsung reported dismal earnings for the first quarter, with profit plunging to its lowest level since 2009.

Samsung responded by cutting production of memory chips. Elsewhere in the industry, smaller rival Micron said recently that it expects to slash 15% of its workforce.

Amid the wreckage, the giant company has found growth in another corner of the semiconductor market, doubling down on its foundry business, the side that makes custom chips for massive customers like Qualcomm, Tesla, Intel and Sony, as well as thousands of smaller players.

Samsung is building a $17 billion chip fabrication plant, or fab, in Taylor, Texas, where it’s promised to start the first U.S. production of advanced chips next year. In February, applications opened for companies like Samsung to get their cut of the $52.7 billion CHIPS and Science Act, passed by lawmakers last year with the aim of bringing chip manufacturing to the U.S. after 30 years of market share losses to Asia.

Samsung is also adding capacity in its home country of South Korea, spending $228 billion on a mega cluster of five new fabs that are scheduled to come online by 2042.

“They’re spending and spending and spending,” said Dylan Patel of research and consulting firm SemiAnalysis. “And why is that? So they can catch up on technology, so they can continue to maintain their leadership position.”

Samsung’s $17 billion new chip fab is under construction in Taylor, Texas, on April 19, 2023.

Katie Brigham

‘We do not settle’

Samsung is one of only three companies that manufacture the world’s most advanced chips, ranking second behind Taiwan Semiconductor Manufacturing Company and ahead of Intel.

Now Samsung is setting its sights on catching TSMC.

“We do not settle to be No. 2,” said Jon Taylor, Samsung’s corporate vice president of fab engineering, in an interview. “Samsung is never satisfied with No. 2 as a business, as a company. We’re very aggressive.”

The company announced an ambitious new road map in October, pursuing a goal to triple capacity of leading-edge manufacturing, and to make industry-leading 2-nanometer chips by 2025 and get them down to 1.4-nanometer by 2027.

“If Samsung hits their targets, they’ll leapfrog ahead of TSMC, but that’s a big if,” Patel said. “TSMC is the only one that the industry trusts to hit their road map.”

CNBC recently went inside Samsung’s Austin chip fab, for the first in-depth tour given on camera to a U.S. journalist. While there, we got a rare interview with the head of Samsung’s U.S. chip business, Jinman Han.

A 34-year veteran of the company, Han’s U.S. oversight includes the foundry operations and the memory chips business.

“We really want to be a bedrock for U.S. industry,” Han told CNBC.

Samsung got its start in 1938 as the Samsung Sanghoe Trading Company, founded by Lee Byung-chull in Korea.

Samsung

Samsung got its start 85 years ago, when founder Lee Byung-chull created it as a trading company for exporting fruit, vegetables and fish in Korea.

“His vision was for our company to be eternal, strong and powerful,” Han said. “So, he chose the name Samsung, which literally means three stars.”

To survive two major wars, the company diversified into industries like textiles and retail. Samsung Electronics was established in 1969, the first Samsung TV came out in 1972, and two years after that Samsung bought Hankook Semiconductor in a bold effort to establish the vertically integrated consumer electronics giant the company is today.

Samsung opened its first U.S. offices in New Jersey in 1978. By 1983, it was making 64KB dynamic random-access memory (DRAM) chips, which were commonly used in computers, and the company had a new U.S. office in Silicon Valley.

Lee Kun-hee took over after his father’s death in 1987, and Samsung’s first mobile phone came a year later. And now Samsung is the world’s biggest smartphone provider, going head-to-head with Apple.

Just a decade after making its first memory chip, Samsung was coming to market with a version that had 1,000 times the capacity. It gained international acclaim in 1992 with the world’s first 64MB DRAM chip, placing the company squarely in first place in memory, where it remains today.

“Its presence is so ubiquitous in South Korea that they call their country the Republic of Samsung,” said Geoffrey Cain, author of the book “Samsung Rising,” published in 2020.

Samsung started making chips in the U.S. with its fab in Austin, Texas, which broke ground in 1996. It opened a second fab in the Texas capital city in 2007. Today, Samsung’s Austin operation is entirely devoted to foundry.

Samsung workers in the cleanroom of the company’s Austin chip fab on April 19, 2023.

Samsung

Samsung’s expansion has brought with it some legal conflict.

In 2018, the company finally ended a seven-year legal battle with Apple over whether Samsung copied the iPhone. Terms weren’t disclosed.

“Apple got a payment from Samsung, so Apple technically won,” Cain said. “But when you add up all the legal costs, all the fighting, all those years, it was just a neutral zero on zero for both sides.”

Challenges haven’t been limited to the courtroom.

In South Korea, protests have erupted around Jay Y. Lee, the third generation of Samsung’s founding family to take the helm. He served time in prison for bribery before being pardoned in August and becoming executive chairman in October.

And during the pandemic, Samsung was hurt by the global chip shortage as demand peaked and the supply chain was disrupted.

“It was really painful,” Han said. “When you look at your customers asking for more chips, but there’s no way you can provide that, it was so painful.”

That dynamic is changing. As consumers rein in their spending in the face of rising inflation, demand for memory chips has weakened sharply. Han said Samsung’s internal data analysis shows “the market will rebound possibly by end of this year.”

Geopolitical tug of war

Investors have already been coming back. The stock dropped almost 30% last year, alongside a broader decline in the global tech industry. The shares are up 28% this year and hit a 52-week high on June 5, on the Korea Stock Exchange. Morgan Stanley recently named it a top pick.

Part of the rally may reflect the latest chapter in the geopolitical chip war between China and the U.S.

In May, China banned products from U.S. memory maker Micron, which led to a stock pop for Samsung. The U.S. also granted Samsung a one-year waiver to operate its two chip fabs in China, despite new rules in October that stop many chip companies from exporting their most advanced technology to the world’s second-biggest economy.

Samsung says it’s adding capacity in Taylor, Texas, which is northeast of Austin, because of U.S. demand. More than 90% of advanced chips are currently made in Taiwan.

“Bringing Taylor on board is just going to increase their ability to source their chips domestically and not have to go into areas of the world where they may have some discomfort,” said Samsung’s Jon Taylor.

Over the last three decades, the U.S. share of global chip production has plummeted from 37% to just 12%. That’s largely because estimates show it costs at least 20% more to build and operate a new fab in the U.S. than in Asia, where labor is cheaper, the supply chain is more accessible and government incentives are far greater.

South Korean President Yoon Suk-yeol looks on as U.S. President Joe Biden delivers remarks during a visit to a semiconductor factory at the Samsung Electronics Pyeongtaek Campus in Pyeongtaek, South Korea, May 20, 2022.

Jonathan Ernst | Reuters

Power and water

For Samsung’s Texas expansion, environmental concerns are big and growing.

The highest-price pieces of equipment Samsung will bring into Taylor are probably the $200 million EUV lithography machines made by ASML. They are the only devices in the world that can etch with enough precision for the most advanced chips.

Each EUV machine is rated to consume about 1 megawatt of electricity, which is 10% more than the previous generation. One study found Samsung used more than 20% of South Korea’s entire solar and wind power capacity in 2020.

“Electricity is the lifeblood of a semiconductor fab in a sense,” said Patel of SemiAnalysis. “There have been multiple instances where electricity has gone out and companies have had to scrap months of production.”

Texas’ energy grid is largely cut off from its neighbors, limiting its borrowing power across state lines. In 2021, that grid failed during an extreme winter storm, leaving millions of Texans without power and causing at least 57 deaths.

“I already signed 12 laws to make the power grid more reliable, more resilient and more secure,” Texas Republican Gov. Greg Abbott told CNBC in April. “And so we can definitely assure any business moving here they will have access to the power they need, but also at a low cost.”

Water is another major need for chip fabs. In 2021, Samsung used about 38 billion gallons of water to make its chips. Roughly 80% of Texas remains stricken by drought.

“We have the Texas Water Board that’s working on that and legislation that we’re working on this session to make sure that with a growing population in Texas, we will be able to provide for the water needs, not just of businesses, but also for our growing population,” Abbott said.

Samsung told CNBC its goal in Austin is to reuse more than 1 billion gallons of water in 2023. At the new Taylor fab, it aims to reclaim more than 75% of the water used.

Of late, all the hype in technology has been around artificial intelligence models to power services like OpenAI’s ChatGPT. Those applications require even more powerful processors, made primarily as of now by Nvidia.

“There are more and more people around the world who can make memory chips,” Cain said. “To stay ahead of the game, you’ve got to get into the newer logic technologies.”

Cain said he sees Samsung “diving deeper into the logic chip segment. So, [that’s] the AI chips, the future applications for semiconductor technology.”

When asked about what’s next, Samsung’s Taylor said the company eventually plans to add more chip manufacturing capacity at its 1,200-acre site in Texas.

“We currently just have one fab announced there,” he said. “But plenty of room for more.”

Watch the video to go behind the scenes at Samsung’s Austin chip fab and the building project in Taylor, Texas.

Technology

Easy returns cause big trouble for Amazon sellers, but return rates show signs of slowing

Published

1 day ago

June 21, 2025

admin

Easy returns cause big trouble for Amazon sellers, but return rates show signs of slowing

Returns on Amazon are free and easy for shoppers, but they’re risky and expensive for the small businesses that sell a majority of the goods on the world’s biggest e-commerce site. Returns have driven some sellers to exit the popular Fulfillment by Amazon program, while others told CNBC they’d like to leave the platform altogether.

At the heart of the problem is a big rise in returns fraud, which has led to customers mistakenly receiving used products when they ordered something new. In two particularly egregious examples involving baby products described to CNBC, Amazon sent customers used diapers and a chiller with someone else’s rotten breastmilk inside.

“I really don’t think that consumers understand how many small businesses are on Amazon and how their return habits affect small businesses and families like mine,” said Rachelle Baron, owner of Beau and Belle Littles, which sells reusable swim diapers on Amazon.

Baron said her business tanked after a return incident with Amazon. The e-commerce platform shipped soiled swim diapers to customers after the used baby products had been returned to Amazon, Baron said.

“There was actually two diapers that were sent out that were poopy,” she said.

In 2024, nearly 14% of all U.S. retail returns were fraudulent, up from 5% in 2018, according to a report by the National Retail Federation. In total, the report found that returns cost retailers $890 billion in 2024.

Amazon started charging sellers in its fulfillment program (FBA) a new fee in June 2024 for items that exceed certain return rate thresholds. Sellers who sign up for FBA rely on Amazon for logistics, including shipping, packing and returns.

In September, a couple months after the fee went into effect, e-commerce group Helium 10 saw return rates for U.S. Amazon sellers drop nearly 5%.

“It’s forcing the seller to have higher quality listings and higher quality products,” said Helium 10 General Manager Zoe Lu.

Amazon has also started adding a warning label to some “frequently returned items,” which could be contributing to the dip.

Rising prices

However, the new fee may also be leading to rising prices.

One survey by e-commerce analysis company SmartScout found that 65% of sellers said they raised prices in 2024 directly because of Amazon fee changes. Other sellers told CNBC returns fraud is the reason they’ve raised prices.

In total, CNBC talked to seven Amazon sellers to find out how they’re handling the rising cost of returns.

“We’re running at about just over 1% net profit on Amazon, totally due to fraud and return abuse,” said Lorie Corlett, who sells Sterling Spectrum protective cases for hot wheels. She said her return rate is 4% on Amazon and only 1% on other marketplaces like Walmart. “It’s really Amazon that’s accountable at the end of the day. People would stop doing it if Amazon held them accountable.”

Amazon told CNBC it has no tolerance for fraudulent returns and that it takes action against some scammers. Those measures include denying refunds and requiring customer identity verification.

Mike Jelliff sells professional music gear through his GeekStands brand on Amazon and eight other marketplaces. He said his return rate on Amazon is three times higher than the average he sees elsewhere.

“On eBay, we’re allowed to block specific customers out,” Jelliff said. “But on Amazon, that customer is still allowed to repurchase from us.”

Jelliff showed CNBC the system of about 40 cameras he’s installed in his Tyler, Texas, warehouse to track every outgoing item, incoming return and unboxing. He uses the images when filing appeals with Amazon, including when customers request refunds claiming they never receive an item. He keeps a blacklist of repeat offenders who commit this kind of fraud and those who return used and damaged items, which become a total loss for him.

Amazon has made some improvements to its returns process, said Jelliff, who doesn’t rely on FBA. This includes Amazon allowing small businesses to make multiple appeals when fighting a fraudulent return. Amazon has also let Jelliff opt-out of automatic return labels for items above $100 starting in 2023, and his return rate has been dropping since.

Mike Jelliff at his GeekStands warehouse in Tyler, Texas, on June 6, 2025. Jelliff sees three times more returns of his professional music gear on Amazon, compared to the average on other marketplaces like eBay and Walmart.

Jacob Schatz

Why returns are destroyed

Figuring out which returns are fraudulent and which are ready for re-sale is labor-intensive and item specific, experts said. That creates plenty of room for error.

“Because it’s such a large operation, things are missed,” said Lu of Helium 10. “I think they’re probably missed on the margins, but these stories are very impactful because it is such a reckoning for the brand.”

Ceres Chill founder Lisa Myers, who once relied on Amazon to handle returns for her business as part of FBA, has one of these stories.

In 2023, Amazon sent one of Ceres Chill’s products to a customer with someone else’s rotten breastmilk inside, said Myers, adding that the customer wrote a review saying, “she will never forget that smell.”

“To have something, and I don’t mean to be dramatic, but dangerous, somebody else’s bodily fluids in your kitchen rotting in something that you had intended to use for your child is unacceptable,” Myers said. “That’s the moment I broke down crying and just sat down and thought, I have no idea how this could have happened.”

Myers said she left FBA after the incident, leaving behind benefits like having her products labeled with Amazon’s Prime badge.

“It hurts our business to not participate in Fulfilled by Amazon,” Myers said. “It’s just we’re not willing to, we will never put profit over the safety and, frankly, mental health of our customers.”

Instead, Myers outsources all her returns to baby resell specialist Goodbuy Gear, which is on track to re-sell 200,000 returned baby products this year.

Re-selling responsibly

Kristin Langenfeld started GoodBuy Gear when she was a new mom struggling to find a good quality, used jogging stroller.

“We’ve spent the last nine years building out a database that has all of the products and the variations, the common issues, the recalls,” Langenfeld said. “For some of these, there’s 40 points that we inspect on the item itself, and it’s really complicated.”

Langenfeld showed CNBC the process at her warehouse in Malvern, Pennsylvania, where each item is inspected for about 15 minutes and is typically handled by at least four employees. The resource intensive process is paying off. She says 33 new sellers signed up in 2024, three times more than the previous year. And with business growing 50% year-over-year, she’s upgrading to a bigger warehouse in Columbus, Ohio.

She was inspired to handle returns after visiting a major retailer’s returns warehouse five years ago.

“Taped on the floor were signs that said ‘incinerate,’ ‘destroy,'” she said.

Returns generated an estimated 29 million metric tons of carbon emissions in 2024, and 9.8 billion pounds of returns ended up in landfills, according to reverse logistics software provider Optoro.

Amazon has faced criticism for destroying millions of pounds of unused products. In 2022, Amazon told CNBC it was “working towards a goal of zero product disposal,” but wouldn’t give a timeline for that ambition. Three years later, that goal is still in the works, with Amazon telling CNBC in a statement, “The vast majority of returns are resold as new or used, returned to selling partners, liquidated, or donated.”

In 2020, Amazon added two new options for sellers to re-home returns. “Grade and Resell” allows all U.S. FBA sellers to have Amazon rate the return and mark it as “used” before re-selling it. FBA Liquidation allows sellers to recoup some losses by offloading palettes of goods for re-sale on the secondary market through liquidation partners like Liquidity Services.

There’s also an FBA Donations program that’s been around since 2019, allowing sellers to automatically offer eligible overstock and returns to charity groups through the non-profit Good360. Amazon told CNBC these seller programs give a second life to more than 300 million items a year.

For shoppers wanting to keep returns from incineration or landfills, Amazon also has options.

Amazon Resale has used and open-box goods, Amazon Renewed sells refurbished items and Amazon Outlet sells overstock. Daily deal site Woot!, bought by Amazon for $110 million in 2010, also sells scratched and dented items. Customers can also trade in certain electronics, like Amazon devices, phones and tablets, for Amazon gift cards or send them to the company’s certified recycler.

“I hope the change that we’re able to make as a country is that we stop making crap,” Langenfeld said. “We should make high quality products that are meant for resale.”

Technology

Meta approached Perplexity before massive Scale AI deal

Published

2 days ago

June 20, 2025

admin

Meta approached Perplexity before massive Scale AI deal

Meta approached artificial intelligence startup Perplexity AI about a potential takeover bid before ultimately investing $14.3 billion into Scale AI, CNBC confirmed on Friday.

The two companies did not finalize a deal, according to two people familiar with the matter who asked not to be named because of the confidential nature of the negotiations.

One person familiar with the talks said it was “mutually dissolved,” while another person familiar with the matter said Perplexity walked away from a potential deal.

Bloomberg earlier reported the talks between Meta and Perplexity. Perplexity declined to comment. Meta did not immediately respond to CNBC’s request for comment.

Meta’s attempt to purchase Perplexity serves as the latest example of Mark Zuckerberg‘s aggressive push to bolster his company’s AI efforts amid fierce competition from OpenAI and Google parent Alphabet. Zuckerberg has grown agitated that rivals like OpenAI appear to be ahead in both underlying AI models and consumer-facing apps, and he is going to extreme lengths to hire top AI talent, as CNBC has previously reported.

Why ether ETF inflows have come roaring back from the dead

Published

2 days ago

June 20, 2025

admin

Why ether ETF inflows have come roaring back from the dead

Omar Marques | Lightrocket | Getty Images

Ether ETFs have finally come to life this year after some started to fear they may be becoming zombie funds.

Collectively, the funds tracking the price of spot ether are on pace for their sixth consecutive week of inflows and eight positive week in the last nine, according to SoSoValue.

The second largest cryptocurrency has become more attractive to institutions in recent weeks largely due to recent regulatory momentum in the U.S. around stablecoins – many of which run on the Ethereum network – the successful IPO of Circle, the issuer of the second-largest stablecoin; and new leadership at the Ethereum Foundation.

“What we’re seeing is institutional recalibration,” said Ben Kurland, CEO at crypto charting and research platform DYOR. “After the initial ETH ETF approval fizzled without a price pop, smart money started quietly building positions. They’re betting not on price momentum but on positioning ahead of utility unlocks like staking access, options listings, and eventually inflows from retirement platforms.”

The first year of ether ETFs, which launched in July 2024, has been characterized by weak demand. While the funds have had spikes in inflows, they’ve trailed far behind bitcoin ETFs in both inflows and investor attention – amassing about $3.9 billion in net inflows since listing versus bitcoin ETFs’ $36 billion in their first year of trading.

“With increasing acceptance of crypto on Wall Street, especially now as a means for payments and remittances, investors are being drawn to ETH ETFs,” said Chris Rhine, head of liquid active strategies at Galaxy Digital.

Additionally, he added, the CME basis on ether – or the price difference between ether futures and the spot price – is higher than that of bitcoin, giving arbitrageurs an opportunity to profit by going long on ether ETFs while shorting futures (a common trading strategy) and contributing to the uptrend in ether ETF inflows.

Stock Chart IconStock chart icon

Ether (ETH) 1 month

Despite the uptrend in inflows, the price of ether itself is negative for this month and flat over the past month.

For the year, it’s down 25% as it’s been suffering from an identity crisis fueled by uncertainty about Ethereum’s value proposition, weaker revenue since its last big technical upgrade and increasing competition from Solana. Market volatility driven by geopolitical uncertainty this year has not helped.

In March, Standard Chartered slashed its ether price target by more than half. However, the firm also said the coin could still see a turnaround this year.

Since last week’s big spike in inflows, they’ve “slowed but stayed net positive, suggesting conviction, not hype,” Kurland said. “The market looks like a heart monitor, but the buyers are treating it like a long-term infrastructure bet.”