Samsung Is Losing The Semiconductor Race To TSMC

Samsung Logo 2019 AM AH 1

Samsung is losing the semiconductor race to its Taiwanese rival TSMC. According to a Nikkei Asia report, the Korean firm trailed TSMC by several months in the launch of 5nm smartphone chips, and this technology gap has been widening ever since. As such, it is losing market share in contract manufacturing.

Samsung apparently failed to secure enough semiconductor production equipment from Dutch supplier ASML last fall, allowing its rival to edge ahead. ASML has reportedly shipped about 100 units of advanced EUV production equipment worldwide. However, more than 70 percent of that volume has gone to TSMC which secured equipment before anyone else. As such, Samsung has lost ground to the Taiwanese company in the production of advanced semiconductors.

The Korean firm has also suffered several other setbacks in recent times though. Perhaps none so bigger than a month-long shutdown of its chip plant in Austin, Texas following a statewide power outage earlier in February this year. It resumed full operation at the facility as of April. However, this shutdown caused a monetary loss of over 300 billion won (more than $270 million) to the company.


Not to mention, this production delay could result in defections from its clients such as Qualcomm. It could also allow TSMC to further widen the gap over Samsung.

This was somewhat reflected in its quarterly earnings report for Q1 2021. The company reported a first profit drop at its semiconductor division during the first three months of the year. Although sales rose eight percent year-on-year (YoY) to 19.01 trillion won (approx. $17 billion), operating profit dropped 16 percent YoY to 3.37 trillion won (~$3 billion).

TSMC, on the other hand, saw its market share in contract manufacturing grow by two percentage points YoY in Q1 2021, capturing 56 percent of the overall market. This growth rate is even bigger (eight percentage points) compared to Q1 2019. In the meantime, Samsung’s market share in the industry dropped by one percentage point during the same period.


Investments delays could allow TSMC to widen the gap over Samsung

Amid an unprecedented global shortage of semiconductor chips, TSMC recently announced plans to invest $100 billion over the next three years to increase its production capacity. It is building a $12 billion chip manufacturing plant in Arizona.

Samsung is also looking to invest around $40 billion in the semiconductor division this year, including a $17 billion chip manufacturing plant in the US. However, since its Vice Chairman and de facto leader Lee Jae-yong is currently in jail, the company is finding it hard to decide on these investment plans. This delay has now allowed TSMC to edge ahead of Samsung in this semiconductor race.

The troubled US-China relationships have also helped the Taiwanese company. It has secured orders from major US customers such as Apple and Advanced Micro Devices. Samsung, on the other hand, maintains two-way diplomacy with the US and China, which hasn’t best pleased either party.


Non-memory semiconductors manufactured on a contract basis account for only seven percent of total semiconductor sales for Samsung. However, this division has greater significance in its mainstay business which included smartphones and memory chips. Whether the Korean firm manages to catch up with TSMC anytime soon, only time will tell.

The company seems confident though. “Our competitiveness in advanced processes is comparable. We have secured large customers and are closing the gap,” said Kim Kinam, head of Samsung’s semiconductor division.