TSMC Rowing the Semiconductor Supercycle... Samsung Electronics Without a Captain

Global Semiconductor Hegemony War... TSMC Accelerates from Early Year
Samsung Struggles with Leadership Vacuum... Semiconductor Self-Reliance Theory Also a Headwind

[Image source=Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] As Taiwan's TSMC, the world's number one semiconductor foundry (contract manufacturing) company, strengthens its close ties with Japan and the United States and expands its global influence, the concerns of Samsung Electronics, the 'second player,' are deepening. Amid growing expectations for a semiconductor supercycle (long-term boom), Samsung must broaden its global supply chain and lay the foundation for growth through timely large-scale investments, but it is not easy to accelerate due to leadership absence and other issues.

According to industry sources on the 9th, TSMC and Samsung Electronics are expected to make record-level capital investments this year. TSMC disclosed last month that its capital expenditure for this year would be around $25 billion to $28 billion (approximately 27 trillion to 31 trillion KRW). The financial investment sector estimates that Samsung Electronics will invest about 35 trillion KRW this year in the foundry and memory semiconductor fields.

◇ TSMC is about 'speed' = Leveraging its massive financial resources, TSMC has been continuing aggressive capital investments since the beginning of the year, turning the ongoing global semiconductor shortage since last year into an opportunity. It is especially expanding its business centered on the U.S. and Japanese markets. Kim Yangpaeng, a senior researcher at the Korea Institute for Industrial Economics & Trade, commented on TSMC's investment in Japan, saying, "Recently, post-processing requires advanced technology, and since such equipment is produced in Japan, there must have been reasons to utilize that technology," adding, "Considering the U.S.-China trade conflict, strategically choosing Japan for the post-processing segment could be the case."

In addition to the expected establishment of a post-processing development company in Japan this time, TSMC is investing $12 billion in Arizona, U.S., by 2024 to build a 5-nanometer process foundry plant. Recently, Taiwanese foreign media reported that internal sessions were held to secure 300 employees for this plant.

Above all, TSMC is also expanding its influence by appearing at venues where communication between the U.S. and Taiwanese governments regarding the global semiconductor shortage takes place. Although TSMC's automotive semiconductor sales account for only about 3% of its total, given the loss of the Chinese market due to U.S.-China tensions, TSMC is seen as using this as an opportunity to solidify its presence in the Japanese and U.S. markets.

Nikkei Asia reported that TSMC offered additional wages to ensure that the construction site of the factory currently being built in Tainan would not stop even during the Lunar New Year holiday, quoting a semiconductor industry insider who said, "This shows a willingness to accelerate construction and development with confidence in future demand."

◇ Samsung is anxious = On the other hand, Samsung Electronics has been holding the investment card and contemplating this year. As the second-largest foundry company, Samsung Electronics set the goal of becoming the number one system semiconductor company by 2030 and has been pushing for technology development and market share expansion since the beginning of the year, but it has faced setbacks such as the re-imprisonment of Vice Chairman Lee Jae-yong. Samsung Electronics, which was surpassed by TSMC (22.7 trillion KRW) in operating profit last year (Samsung at 18.81 trillion KRW), is eager but finds it difficult to proceed with investments quickly.

The large-scale investment Samsung can expect immediately is the new and expanded semiconductor factory in the U.S. Local media reported that Samsung requested tax incentives from the local government, considering a $17 billion expansion of the semiconductor plant in Austin, but Samsung has not yet made a final decision. Besides Austin, there are ongoing love calls from various parts of the U.S., but Samsung is still deliberating over Arizona, New York, and South Korea, weighing pros and cons.

Also, in last month's earnings conference call, Samsung Electronics stated, "We will pursue strategic mergers and acquisitions (M&A) by 2023," but no concrete news has emerged yet. Industry insiders mention companies such as the Netherlands' NXP, Switzerland's STMicroelectronics, the U.S.'s Texas Instruments (TI), and Japan's Renesas as potential M&A targets.

[Image source=Reuters Yonhap News]

◇ 'Semiconductor self-reliance theory' too = If industry leader TSMC strengthens its relations with economic powerhouses like the U.S. and Japan, Samsung Electronics, which competes for the same market, is expected to face difficulties expanding its market. This is because it is not easy for Samsung to penetrate major U.S. semiconductor companies such as Apple, Qualcomm, Nvidia, Intel, and AMD, which have been long-term clients of TSMC for over 30 years. As TSMC expands its business in the U.S. and other countries, Samsung's foothold is likely to be limited.

Moreover, the 'semiconductor self-reliance theory' emerging worldwide in response to the semiconductor shortage could also act as a negative factor. Peter Altmaier, Germany's Minister for Economic Affairs, recently announced readiness to immediately invest 1 billion euros in semiconductor manufacturing technology development projects within the European Union (EU). The U.S. semiconductor industry has been consistently sending messages to the Joe Biden administration to revive U.S. semiconductor manufacturing, and the Biden administration has shown willingness to support this. Additionally, China has been steadily pushing its semiconductor development plan, which started in 2014, by investing large-scale funds.

An industry insider said, "Vice Chairman Lee emphasized that Samsung must continue on its path regardless of his situation, but decision-making delays are inevitable," adding, "A prolonged leadership absence can delay decisions on new businesses and large-scale investments, resulting in falling behind in global competition."

This content was produced with the assistance of AI translation services.