Samsung discloses its plans to "defeat" TSMC & keep SMIC at bay

Samsung’s semiconductor business is currently in the midst of a crisis directly related to Samsung Foundry. The company’s factories have not been up to par with the most modern chip manufacturing processes, leading to the loss of potential contracts with big clients. However, Samsung has a plan to address the gap with TSMC and try to defeat them in the future, as well as keep SMIC at bay.

Samsung’s semiconductor business has been struggling for some time

Samsung Semiconductors and Samsung Foundry are separate but closely related divisions. Samsung Semiconductors, which is in charge of chip design, relies on the smooth running of Foundry, the division that manufactures them. However, the Foundry division is facing significant challenges with its 3nm GAA tech, making the implementation of the Exynos 2500 chip in the Galaxy S25 series unfeasible.

Samsung has been making changes to try to resolve the situation. One of the most significant ones was the promotion of Han Jin-man, who was previously the Executive Vice President of Samsung’s US chip business, to the position of Head of the entire foundry business. The first move by the executive was to announce a “two-track strategy” to regain Samsung’s competitive position in the semiconductor market.

This is Samsung’s plan to defeat TSMC in the future

According to Han Jin-man, the firm will focus on achieving a high yield rate on its 2nm wafers. Samsung aims to prevent a situation similar to the current one, where the low yield of its 3nm wafers caught them off guard. The second part of the strategy consists of looking for clients who still require semiconductor manufacturing in older processes (10nm and older). This will ensure greater use of Samsung Foundry capacity while earning more revenue.

Currently, the main threats to Samsung’s semiconductor business are TSMC and SMIC. TSMC is the undisputed leader with a market share of almost 65%. Samsung wants to boost the yield rate of its 2nm process to prevent all the big names from turning solely to TSMC next year. The company’s current situation has caused it to lose important clients such as NVIDIA, the AI chips leader. Even Google will move production of Tensor chipsets to TSMC starting next year.

SMIC has become a potential major threat

The other big threat to Samsung is SMIC, the Chinese chipmaker best known for working with Huawei. Apparently, the market gap between the two companies is closer than ever. By Q2 2024, Samsung had a 5.8% market share lead over the Chinese company. However, the South Korean giant’s lead quickly shrank to just 3.3% by Q4 2024. At this rate, even SMIC could overtake Samsung if things don’t change.