Despite strong overall performance in the second quarter of 2024, Samsung Electronics is still struggling to cope with losses in its wafer foundry business. Most analyses indicate that the gap between Samsung and TSMC is widening. In addition, if Samsung fails to improve the yield and technology of its OEM processes in a timely manner, the difficulties it faces in acquiring large technology customers may lead to further market share decline.
According to media reports citing predictions from South Korea's industry and securities departments, Samsung's wafer foundry business is expected to face operating losses of "trillions of Korean won" in 2024 (1 trillion Korean won is approximately 5.23 billion yuan). Despite the increasing demand for artificial intelligence (AI) and the recovery of the smartphone market driving Samsung's overall revenue performance, the report shows that Samsung still faces challenges in acquiring major OEM customers.
Samsung recently released its Q2 2024 financial report, with total revenue of KRW 74.07 trillion (approximately USD 54.184 billion), a year-on-year increase of 23.4%, and operating profit of KRW 10.4 trillion, a year-on-year increase of 1462.3%. Although the performance of the Device Solutions (DS) department has been announced, detailed individual performance data for wafer foundry and LSI businesses have not been disclosed.
The Korean industry generally believes that Samsung's wafer foundry and system LSI businesses will record losses in the second quarter of 2024. The South Korean securities industry estimates that Samsung's semiconductor business (excluding its memory division) incurred a loss of nearly 300 billion Korean won in the quarter. Samsung Securities predicts that the operating loss of its non memory division will reach 457 billion Korean won.
When it comes to the performance of wafer foundry business, Samsung's market share in 2023 is only 11%, while TSMC's is 61%, with a gap of 50 percentage points. Quan Yongxuan, the head of Samsung's DS department, pointed out that Samsung's improved performance in the second quarter of 2024 was due to the improved market environment, implying that the existing problems in the wafer foundry business have not been resolved.
Since 2023, Samsung's wafer foundry market share has continued to decline, and most large technology companies planning to build AI servers have handed over related orders to TSMC, which has advanced process competitiveness. Intel's wafer foundry business once attempted to challenge Samsung's position, but ultimately decided to lay off more than 15% of its workforce, involving over 17500 people, due to expanding losses.
According to South Korean media, the primary task of Samsung's wafer foundry business is to stabilize major customers. It is reported that TSMC has recently raised the price of 3nm process by more than 20%. In the second half of 2024, the demand for advanced processes below 3nm from large technology companies is expected to increase. If Samsung can improve the yield of its GAA (fully surround gate) 3nm process in a timely manner, it can increase order volume and market share through competitive pricing.
In addition, Samsung needs to shift its sales structure from the smartphone field to the high-performance computing (HPC) field. For HPC chip orders, Samsung needs to use more technologies such as Back Power Network (BSPDN). Samsung plans to begin mass production of its 2nm process in 2025 and may introduce BSPDN technology in advance to enhance competitiveness.
Samsung previously revealed that its HPC customers doubled in Q2 2024 compared to Q2 2023. However, in order to achieve its goal of increasing customer numbers fourfold and revenue ninefold by 2028, Samsung still needs to actively strengthen its technological capabilities.
