Samsung Faces Q3 Setback as TSMC Outpaces Chip Revenue Growth, Analysts Predict

Samsung Electronics' chip manufacturing division is expected to fall behind TSMC in Q3 revenue, following stagnant sales in its Device Solutions division. TSMC, benefiting from a 12.9% quarterly growth, is projected to lead by a $2.5 billion margin, signaling a shift in the semiconductor landscape.

Samsung's Q3 Revenue Expected to Stagnate, Allowing TSMC to Surpass in Global Chip Sales

According to reports from the Korean press (via Wccftech), Samsung Electronics' chip manufacturing division, known as the Device Solutions (DS) division, is expected to fall behind Taiwan Semiconductor Manufacturing Company (TSMC) in revenue for the third quarter. This represented a sharp contrast to the second quarter when a recovery in the global memory market propelled Samsung DS to the top of the worldwide foundry sector.

Korean analysts anticipate that Samsung DS' third-quarter revenue will remain stagnant, while TSMC’s revenue saw a notable 12.9% increase over the previous quarter. As a result, TSMC is expected to surpass Samsung in net sales.

Earlier this month, Samsung released its preliminary third-quarter earnings, forecasting sales of KRW79 trillion (approximately $57.7 billion), representing a 17.2% annual growth. In the second quarter, Samsung posted KRW74 trillion in revenue, with KRW28.56 trillion generated by its DS division, or roughly $21 billion. This allowed Samsung DS to edge out TSMC, which reported $20.82 billion in sales during Q2, marking a significant 30.8% annual growth as it rebounded from the post-pandemic downturn in the chip industry.

According to Gartner, Samsung credited its Q2 success to solid demand for memory products, which had suffered throughout 2023, leading to a 37.5% annual revenue decline. This slump also allowed Intel to regain its position as the world's largest chip manufacturer by revenue. However, Samsung's brief lead in Q2 may be eclipsed in Q3 if industry forecasts reported by The Korea Herald prove accurate.

Samsung Faces Q3 Revenue Stagnation as TSMC Gains Ground with Strong $23.5 Billion Sales

According to the report, Samsung DS' revenue is expected to remain flat in the third quarter, while TSMC’s Q3 revenue has reached $23.5 billion. If Samsung fails to surpass its Q2 revenue of $21 billion, TSMC will outpace Samsung by a substantial $2.5 billion margin.

While both companies are significant players in semiconductor manufacturing, TSMC specializes in producing CPUs and GPUs, or logic chips, whereas Samsung’s business also encompasses memory products. Samsung DS is divided into three subdivisions: Memory, Samsung LSI, and Samsung Foundry. Samsung LSI manufactures Exynos processors and ISOCELL image sensors, while Samsung Foundry is the company’s contract chip manufacturing arm.

However, both the LSI and Foundry divisions have faced challenges. NVIDIA, a significant client, primarily relies on TSMC for its AI GPUs, and a global downturn in smartphone demand has reduced Samsung LSI’s production volumes. The Korea Herald also reported that Samsung's LSI and Foundry divisions likely ran a KRW1 trillion deficit in the third quarter. Additionally, Samsung has struggled to secure NVIDIA as a customer for its advanced memory products, as the U.S.-based Micron remains NVIDIA’s primary supplier of HBM3 and HBM3e memory chips.

TSMC’s advanced manufacturing process, which includes technology nodes of 7 nanometers and below, accounted for 67% of its revenue in the fourth quarter of 2023, an eight-percentage-point increase. In contrast, Samsung Foundry’s revenue dropped by 1.9% sequentially to $3.62 billion during the same period, further widening the gap between the two semiconductor giants.