As the global semiconductor foundry market shows signs of recovery, Samsung Electronics continues to trail significantly behind sector leader TSMC in market share. Additionally, it is facing substantial financial losses. Samsung's future success in wafer foundry development hinges on its ability to transition into AI, high-performance computing (HPC), and automotive electronics manufacturing.
According to data from market research firm Counterpoint Research, Samsung's market share in the foundry business was 13% in the second quarter of 2024, compared to TSMC's 62%, maintaining the same gap as in the first quarter.
Although Samsung's foundry sales increased by 23% year-over-year due to growing demand for AI semiconductors and IT end devices, the increased orders mainly came from startups. Securing major clients remains difficult, making it challenging to close the gap with TSMC.
Industry sources predict that if current trends continue, Samsung's foundry business will incur losses exceeding KRW1 trillion (approx. US$750 million) in 2024. Samsung has been expanding its capital expenditure to maintain competitiveness in advanced processes, but with orders concentrated in lower-profitability mobile devices and rising fixed costs, the company still struggles to escape losses.
Expanding the revenue share of the more profitable AI and HPC sectors is the biggest task for Samsung's foundry business. According to TSMC's earnings call, HPC accounted for 52% of its sales in the second quarter, an increase of 6 pp quarter-over-quarter.
In contrast, Samsung Foundry's main sales driver remains its mobile business, with HPC accounting for only 19% of its revenue in 2023. In 2024, Samsung announced at its foundry forum that it aims to adjust its revenue mix by 2028, with targets of 30% from the mobile business and 45% from HPC.
Securing competitiveness in the automotive electronics sector is another major task. TSMC is constructing a wafer fab in Dresden, aiming for operation by 2027, to meet the demand of nearby automakers and expand orders. While Samsung has relocated its European headquarters to Munich and has been actively securing foundry-related talent, there is no clear information on orders this year.
In this context, Samsung plans to hold a foundry forum in Germany in October 2024 to secure automotive component customers. The company is expected to announce mass production plans for its most advanced 2nm automotive electronics solutions.
The rapid advancements of China's SMIC and Taiwan's UMC are drawing attention from the South Korean industry. Although these companies have less experience in advanced process R&D and mass production compared to Samsung, they are gradually increasing their market share through competitive pricing, government support, and collaboration with local IC design houses. For example, over 30% of SMIC's revenue comes from Samsung smartphone orders, and its revenue is expected to grow by up to 15% quarter-over-quarter in the third quarter of 2024.
Industry sources noted that as the third-quarter peak season approaches, revenue for all foundry companies is expected to increase, but Samsung's market share performance doesn't stand out. To close the gap with TSMC, securing large clients will be more critical than the number of clients.
For this purpose, Samsung is not only striving to secure clients in the 3nm and 2nm markets but also accelerating the construction of production facilities, such as its Taylor plant in the US. Additionally, Samsung's Device Solutions (DS) division began its regular recruitment drive in early September 2024, and the company is actively participating in forums in the US and Taiwan to secure talent.
