Samsung Under Pressure
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s top semiconductor foundry, has maintained its position as the global semiconductor leader throughout the fourth quarter, ahead of Samsung Electronics. Forecasts suggest TSMC’s dominance will continue, fueled by a recovery in business performance in the second half of the year, securing major customers like Apple in the field of artificial intelligence (AI) semiconductors and iPhones.
According to industry sources on July 23, TSMC recorded sales of 480.8 billion Taiwan dollars (US$15.32 billion) and net profits of 181.8 billion Taiwan dollars in the second quarter. This represents a 10% and 23.3% decrease, respectively, compared to the previous year. This is the first decrease in TSMC’s quarterly net profits in four years since Q2 2019.
While TSMC couldn’t avoid the global semiconductor chill, it has minimized the impact of the economy by focusing on the foundry field. Unlike memory semiconductor companies, which are heavily burdened by inventory, foundry companies have a relatively stable income structure.
While TSMC posted close to 8 trillion won in operating profits, Samsung Electronics is likely to record a loss of about 4 trillion won in the semiconductor business for the second quarter in a row. Samsung Electronics reported sales of 60 trillion won (US$47 billion) and operating profits of 600 billion won in the second quarter, a 22.3% and 95.7% decrease, respectively, from the same period last year. The financial investment industry predicts that Samsung’s DS division, which is responsible for the semiconductor business, will also record similar sales of about 13 trillion won as in the first quarter. The company’s leading memory semiconductor business was unable to escape the sluggishness in both price and shipment volume, resulting in sales falling to half of last year’s level.
TSMC is expected to record a solid operating profit rate of 40% in the third quarter, but it will take nearly a year for Samsung’s memory semiconductor business to improve its profitability to the usual levels.
Previously, Samsung Electronics had overtaken Intel to regain the world’s top spot in semiconductor sales for the first time in three years in 2021, thanks to the boom in memory semiconductors. However, TSMC overtook Samsung in the third quarter of last year. The gap in quarterly sales between Samsung and TSMC, which was around 2 trillion won, has widened to 7 trillion won in the first quarter of this year. Ironically, Intel, which was once overtaken by Samsung, is now overtaking Samsung again, leveraging its dominant market share in PC and server central processing units (CPUs).
According to market research firm Omdia, Intel led Samsung for three consecutive quarters with US$11.139 billion in first quarter chip brand sales compared to Samsung’s US$8.929 billion. Intel’s Chief Financial Officer (CFO) David Zinsner recently predicted that “second quarter sales will exceed market estimates.”
The market predicts that TSMC’s monopoly will continue for the time being, as orders for AI semiconductors are booming and new series of Apple iPhones are expected to be launched in the second half of the year. TSMC still maintains a lead over its competitors in terms of advanced packaging technology and manufacturing processes.
While TSMC recently announced the delay of advanced semiconductor production at its U.S. Arizona plant due to a shortage of professionals, it is further widening the gap with Samsung by increasing the scale of investment in state-of-the-art processes and advanced packaging technologies in Taiwan, where its headquarters is located. An industry insider said, “In reality, Samsung Electronics needs to make profits from the memory sector to continue investing in the system semiconductor business, including the foundry.”
Samsung Electronics is tasked with strengthening the proportion of foundries and system semiconductors to complement its semiconductor portfolio, which is concentrated on memory. In this regard, Samsung Electronics recently hosted a Foundry Forum in the U.S. and domestically to share its mid-to-long term foundry strategy with its customers.