TSMC vs. Samsung: the battle for semiconductor dominance

The AI Revolution of the 21st century is reliant on a tiny piece of innovation — semiconductors. Playing a crucial role in modern technology and, by extension, the global tech and electronic industry, semiconductors are used in the manufacturing of electronic chips that power smartphones, computers, cars, and industrial machinery.
 

Two giant names dominate the semiconductor industry: Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics. While TSMC leads in market share, Samsung follows closely behind, proving itself to be a formidable competitor with the potential to dethrone TSMC at any given moment.
 

This article aims to provide traders with actionable insights into the ongoing battle between TSMC and Samsung, exploring stock price performance, the status quo, market implications, and potential impacts from other competitors. Understanding the interplay between these entities can help traders identify trading opportunities.
 

Overview of TSMC: Taiwan Semiconductor Manufacturing Company
 

Established on 21 February 1987, TSMC is the world's largest dedicated independent semiconductor foundry. Known as the pioneer that focused solely on manufacturing semiconductor components designed by other companies, TSMC holds over 60% of the market share as of Q4 2023.
 

The company's cutting-edge manufacturing capabilities and consistent technological advancements have made it a preferred partner for major tech companies, including Apple, AMD, and Nvidia.
 

Overview of Samsung Electronics
 

Founded in 1969 in Suwon, South Korea, Samsung Electronics is a global leader in technology and consumer electronics. The company operates in several segments, including Consumer Electronics (CE), Information Technology & Mobile Communications (IM), and Device Solutions (DS).
 

TSMC vs Samsung: Revenues
 

TSMC
 

Part of TSMC’s appeal stems from its steady revenue growth. In 2021, it reported a revenue of $57.39 B. In 2022, the company made $73.86B, a 15% increase, while in 2023, it experienced a 4% dip making $70.59 B.
 

The company's aggressive investment in research and development (R&D) has enabled it to maintain its technological edge. TSMC has been a pioneer in adopting new manufacturing technologies, being the first to commercialise the 7 FinFET (N7) volume production and the N5. Both N7 and N5 were essential in producing high-performance, yet energy efficient chips.
 

In 2023, TSMC led the mass production of 3nm chips solidifying its position as one of the leading players in the industry.
 

Samsung
 

Samsung Electronics has been a global leader in various technology sectors. While it operates a diverse range of businesses, its semiconductor division is a significant contributor to its revenue.
 

Samsung Foundry, the semiconductor manufacturing arm, is the second-largest foundry in the world, with a market share of 7.5% as of 2023. Samsung's integrated device manufacturing (IDM) model allows it to design and manufacture its own chips, as well as produce semiconductors for other companies, such as Qualcomm and IBM.
 

In terms of revenue, Samsung reported $240.71B in 2021, $233.13B in 2022, and $194B in 2023. It should be noted that Samsung’s diversified business model allows it to weather fluctuations better in specific markets, unlike its competitors.
 

Not to be beaten, Samsung is also at the forefront of semiconductor innovation, particularly in memory chips and advanced nodes. It has also started mass production of 3 nanometre chips using gate-all-around (GAA) technology, which promises improved performance and power efficiency over traditional FinFET designs.
 

Yearly revenue	2021	2022	2023
TSMC	$57.39B	$73.86B	$70.59B
Samsung	$240.71B	$233.13B	$194B

 

TSMC vs Samsung: Technological advancements
 

TSMC
 

• 3nm Process Technology - TSMC's 3nanometre process technology offers significant improvements in power, performance, and area (PPA) over its 5nm predecessor. The 3nm nodes are expected to deliver 10-15% speed improvement and 25-30% power reduction.

• Chip-on-Wafer-on-Substrate (CoWoS) and Integrated Fan-Out (InFO) - These advanced packaging technologies enhance chip performance and efficiency, allowing TSMC to meet the growing demand for high-performance computing (HPC) and artificial intelligence (AI) applications.
   

Samsung
 

• Gate-All-Around (GAA) Technology - Samsung’s adoption of GAA for its 3nm process is a significant leap forward. GAA technology allows for better control of current flow through the transistor, enhancing performance and energy efficiency.

• V-NAND and DRAM - Samsung continues to innovate in memory technology, with advancements in V-NAND and DRAM contributing to its leadership in the memory market. These innovations are crucial for data-intensive applications and next-generation computing.
   

TSMC vs Samsung: Major contracts and partnerships
 

TSMC
 

• Apple - TSMC is Apple’s exclusive supplier for advanced processors used in iPhones, iPads, and MacBooks. This relationship has been a significant revenue driver for TSMC, with Apple accounting for about 25% of TSMC’s revenue in 2023.

• AMD and Nvidia - TSMC also produces high-performance chips for AMD and Nvidia, two key players in the gaming and data centre markets. AMD’s Ryzen and EPYC processors, as well as Nvidia’s GPUs, rely on TSMC’s cutting-edge process technologies. AMD made up 7% while Nvidia contributed 11% of TSMC’s 2023 revenue.
   

Samsung
 

• Qualcomm - Samsung’s partnership with Qualcomm includes manufacturing Snapdragon 8 Gen 1 chips using its 4nm process. This collaboration is crucial for Samsung as it showcases its ability to produce high-performance mobile processors.

• IBM - In 2021, Samsung and IBM announced a partnership to develop next-generation logic and memory technologies pushing the boundaries of semiconductor innovation, leveraging IBM’s research expertise and Samsung’s manufacturing capabilities.
   

TSMC vs Samsung: Market Implications
 

The heated competition between TSMC and Samsung has significant implications for global semiconductor supply chains. Both companies are key suppliers for major tech firms, and their production capabilities influence the availability of advanced chips worldwide. Given its importance, key developments or setbacks can be felt not only on the stock price of these companies, but also in other industries.
 

• Automotive Industry - The ongoing chip shortage has severely impacted the automotive sector, highlighting the importance of a robust semiconductor supply chain. Both TSMC and Samsung are ramping up production of automotive-grade chips to meet this growing demand.

• Consumer Electronics - The demand for high-performance chips in smartphones, laptops, and gaming consoles drives the competition between TSMC and Samsung. Innovations in semiconductor technology directly influence the capabilities and features of consumer electronics. Take note of news on the strategic partnerships between either TSMC or Samsung and electronic brands, such as Apple, Nvidia, and IBM.

• Data Centers and AI - The rise of data centers and AI applications requires advanced semiconductors with high processing power and energy efficiency. TSMC and Samsung’s advancements in 3nm and GAA technologies cater to these needs, supporting the growth of cloud computing and AI companies, such as Amazon, Google, and Microsoft.
   

TSMC vs Samsung: Stock performance
 

The competition between TSMC and Samsung is closely watched by traders as their performance and technological advancements directly impact stock valuations and market sentiment.
 

TSMC

TSMC’s stock has shown strong performance in the past few years, reflecting its market leadership and technological advancements. Driven by strong demand for advanced chips and strategic capacity expansions, TSM is up by over 544% from its price slump when COVID-19 blew up in March 2020.
 

Samsung

Similarly, Samsung’s diversified business model and significant investments in semiconductor technology have positively influenced its stock performance. In 2022, Samsung’s semiconductor division contributed significantly to the company’s overall revenue, supporting a 20% increase in its stock price.
 

TSMC vs Samsung: what’s next?

As the industry continues to evolve and technology gets developed, one can’t help but ask what’s next for the two semiconductor giants. Several factors will influence the future landscape of this rivalry, including technological advancements, strategic investments, and geopolitical dynamics.
 

Future plans

TSMC plans to continue its leadership in advanced node manufacturing with the development of 2nm technology, expected to enter mass production by 2025. Its main client, Apple, is expected to use the 2nm process for chip production of the iPhone 17 and Mac’s M-series. Further down the line, TSMC is developing a 1.4nm process, which is expected for mass production in 2027.

On the other hand, Samsung aims to advance its Gate-All-Around (GAA) technology with future iterations, potentially reaching 2nm and beyond. Samsung’s commitment to GAA and its focus on developing next-generation memory technologies will be crucial in maintaining its competitive edge against TSMC.
 

Strategic investments

In 2021, TSMC management announced a $100 billion investment plan spanning over 3 years, which includes global expansion, particularly in the US and Japan. These expansions aim to mitigate the risks of geopolitical tensions and ensure a stable supply chain.

Meanwhile, in the same year, Samsung also announced that it was increasing the amount it plans to invest in system semiconductor until 2030, from $120 billion to $150 billion.

The back-and-forth retaliation of investment expansion by both companies is a closely watched battle by traders and investors. Will Samsung challenge TSMC’s dominance or will it bow down to TSMC as the clear leader in semiconductor manufacturing?
 

Other competitors in the semiconductor industry

While TSMC and Samsung are the dominant players in the semiconductor industry, several other companies are making significant strides and could impact the competitive landscape.
 

Intel (INTC)

Intel is another leading player in the semiconductor industry, particularly in CPUs for PCs and data centres. Despite facing delays in its 7nm process technology (Intel 4), Intel is investing heavily to catch up with TSMC and Samsung.

Intel’s IDM 2.0 strategy aims to expand its foundry services and develop advanced manufacturing technologies. Intel plans to produce 7nm chips and is working on future nodes to compete with TSMC and Samsung.
 

GlobalFoundries

GlobalFoundries is the third-largest foundry, focusing on specialised manufacturing processes. While it does not compete directly in the cutting-edge node space, it plays a crucial role in producing chips for various applications, including automotive and IoT.

Due to the growing demand, it has announced plans for capacity expansion and laser focus on developing new process technologies.
 

SMIC (Semiconductor Manufacturing International Corporation)

SMIC is China’s largest foundry, established to reduce the country’s reliance on foreign semiconductor technology. SMIC is focusing on developing advanced manufacturing capabilities, though it lags behind TSMC and Samsung in cutting-edge nodes.

Due to trade restrictions and access to advanced manufacturing equipment are major roadblockers for SMIC. However, it has strong government support and investments in R&D, providing it opportunities for growth.
 

TSMC vs Samsung: Trading strategies

Traders may maximise the volatility around major announcements, earnings reports, and key industry developments to identify short-term trading opportunities. Technological advancements and news on new partnerships can often lead to significant price shifts.

Some key indicators to watch out for when considering trading TSM or Samsung’s stock could be its financial statements, such as revenue growth, profit margins, and R&D expenditures. Tracking changes in market share and capacity expansion plans could also indicate the competitive positioning of each company.

Considered rivals in the semiconductor industry, a win for Samsung could indicate a loss for TSM and vice versa. Traders may explore the opportunities presented by shorting strategies on TSM made available through CFD trading with ThinkMarkets.

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