In the semiconductor industry, the competition between leading players like TSMC (Taiwan Semiconductor Manufacturing Company), Samsung, and Intel is well-known, especially in the realm of chip foundriesWhile these companies are all major contenders, TSMC has, at least for the time being, maintained an unchallenged dominance in the marketRecent developments involving Qualcomm and Apple further underline this status, as both companies have made moves that could significantly impact the industry landscape.

One of the most significant shifts occurred with Qualcomm’s decision to transfer its Snapdragon 8 Gen 1 chip production from Samsung to TSMCThe Snapdragon 8 Gen 1, initially fabricated by Samsung, will now see its orders rerouted to TSMC, with shipments expected as early as April of this yearThis move is a clear indication that Qualcomm is distancing itself from Samsung, opting instead for TSMC to handle its future chip production

The reasons behind this shift are still unclear, but many analysts speculate that it might be linked to issues with the quality and performance of the chips produced by Samsung.

Qualcomm’s decision to move its production is not an isolated caseApple, a long-time rival of Samsung in the smartphone market, has also made a notable change in its chip supply chainSources indicate that TSMC has successfully secured all of Apple's orders for 5G RF (radio frequency) chips, further pushing Samsung out of the pictureThese chips are expected to be used in the upcoming iPhone 14 seriesThis marks a significant turning point in the relationship between Apple and Samsung, which, since the iPhone 7 series, has become increasingly strainedAs things stand, Samsung now finds itself on the outside looking in, caught between TSMC, Qualcomm, and Apple—three of the most influential players in the technology sector.

The industry reaction to this shift has been noteworthy

• A Song of Ice and Fire of the CNS
• RBA Rate Cut Expectations Build
• Institutional Investors Steadily Holding Bitcoin ETFs
• News from Europe: a staggering €59.2 billion
• A-Shares Eye Rebound as 3x Leveraged China ETF Gains 5%

Even foreign media have acknowledged that TSMC has, for now, gained a near-monopoly on advanced semiconductor manufacturingThis dominance stems from TSMC’s cutting-edge processes, particularly in the 7nm and 5nm nodes, where it has been ahead of competitors like SamsungWhen TSMC first began mass-producing 7nm chips, for example, Samsung was only just announcing its own plans to enter the marketIn this context, TSMC's technological lead has been a significant advantageBut it wasn’t just TSMC’s prowess that created this situation—Samsung also helped seal its own fateThe South Korean giant faced significant challenges with its 4nm process, causing it to lose key clients like Qualcomm.

While TSMC may be reaping the benefits of Samsung’s internal struggles, the semiconductor market is not static, and Samsung’s missteps could open the door to new opportunities for the company—particularly if it can secure a deal with Huawei, a Chinese tech giant that has struggled with chip supply issues.

Huawei’s predicament is well-known

Due to US sanctions that severely restrict its access to advanced semiconductor technology, Huawei has been unable to produce its own Kirin chips, which has caused its market share in smartphones to plummetDespite this, Huawei remains a key player in the global tech industry, particularly in China, and its brand loyalty and customer base remain strongShould Huawei overcome its chip shortage and resume production of its flagship devices, it could once again become a formidable competitor in the smartphone market.

Herein lies an opportunity for SamsungIf Samsung can secure a deal to manufacture Huawei’s Kirin chips, it could dramatically alter the competitive dynamics of the semiconductor industrySuch a move would not only help Samsung recover lost ground but also challenge TSMC’s dominance, potentially reshaping the competitive landscape in a way that favors SamsungHowever, several factors must align for this to happen.

First, US policy on Huawei remains a critical obstacle

Washington has been adamant about preventing any Western semiconductor companies from supplying Huawei with the technology needed to produce advanced chipsIf the US government maintains its stance, it could prevent Samsung from working with Huawei, as any such collaboration would likely require American-made technology, which is subject to export restrictionsIn essence, if the US refuses to grant Samsung the necessary licenses, the South Korean giant would be unable to step in and take over Huawei’s chip production.

Second, even if the US were to relax its restrictions, Samsung would need to address some of the lingering issues with its manufacturing processDespite its impressive technological strides, Samsung has struggled with maintaining high yields in its chip production, which could undermine its competitivenessIf Huawei were to choose Samsung for its chip foundry needs, the South Korean company would need to demonstrate the ability to produce high-quality chips at scale

Poor yields or inconsistent performance could severely damage Huawei’s reputation, which, given the importance of its Kirin chips to its overall product strategy, would be unacceptable. 

Lastly, there is the question of how Samsung can improve its technological processes and manufacturing efficiencyEven if Huawei were to shift its orders to Samsung, there is no guarantee that the South Korean company would be able to maintain the same level of quality and innovation that TSMC has demonstratedIt would require significant investment in R&D and upgrades to its production capabilities, especially in the advanced process nodes like 5nm and 4nm, where TSMC currently holds a significant edgeWithout a clear path forward on these fronts, Samsung may find itself increasingly marginalized in the foundry business, even as it attempts to challenge TSMC.

In conclusion, while TSMC currently holds a dominant position in the semiconductor foundry market, the evolving dynamics of the industry suggest that Samsung still has a chance to regain some of its lost ground