TSMC vs Samsung: Who’s leading the semiconductor race?

TSMC vs Samsung: Who’s leading the semiconductor race?

The AI revolution of the 21st century hinges on a tiny yet crucial innovation — semiconductors.

Playing a pivotal role in modern technology, semiconductors are essential in the manufacturing of electronic chips that power smartphones, computers, cars, and industrial machinery.

Two giants dominate the semiconductor industry

Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics are the two titans in the semiconductor industry.

While TSMC leads with a significant market share, Samsung remains a formidable competitor, always ready to challenge TSMC’s dominance.

TSMC’s origins and market position

Established in 1987, TSMC is the world’s largest dedicated independent semiconductor foundry.

Known for focusing solely on manufacturing semiconductor components designed by other companies, TSMC holds over 60% of the market share as of Q4 2023.

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

Samsung’s overview

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: Revenue comparison

TSMC has shown consistent revenue growth, reporting $57.39 billion in 2021, $73.86 billion in 2022 (a 15% increase), and $70.59 billion in 2023 (a 4% dip).

TSMC’s aggressive investment in research and development (R&D) has enabled it to maintain its technological edge.

The company pioneered the 7nm FinFET (N7) volume production and the N5 process, essential for producing high-performance, energy-efficient chips.

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

Samsung’s diversified revenue streams

Samsung Electronics reported $240.71 billion in revenue in 2021, $233.13 billion in 2022, and $194 billion in 2023. Samsung’s diversified business model allows it to weather fluctuations better in specific markets compared to its competitors.

Samsung is at the forefront of semiconductor innovation, particularly in memory chips and advanced nodes.

It has started mass production of 3nm chips using gate-all-around (GAA) technology, promising improved performance and power efficiency over traditional FinFET designs.

TSMC’s key partnerships

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

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

Samsung’s strategic alliances

Qualcomm: Samsung’s partnership with Qualcomm includes manufacturing Snapdragon 8 Gen 1 chips using its 4nm process, showcasing 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.

Impact on global semiconductor supply chains

The 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.

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.

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.

TSMC vs Samsung stock performance

TSMC’s stock has shown strong performance, 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 impacted markets in March 2020.

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.

What’s next for TSMC and Samsung?

TSMC plans to continue its leadership in advanced node manufacturing with the development of 2nm technology, expected to enter mass production by 2025. Apple is expected to use the 2nm process for chip production in the iPhone 17 and Mac’s M-series.

Further down the line, TSMC is developing a 1.4nm process for mass production in 2027.

Samsung aims to advance its 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 announced a $100 billion investment plan spanning three years, including global expansion in the US and Japan. These expansions aim to mitigate geopolitical risks and ensure a stable supply chain.

Samsung also announced plans to increase its investment in the system semiconductor sector from $120 billion to $150 billion by 2030.