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Competitors threaten Samsung Electronics’ dominance across the board
Although Samsung Electronics has a leading position in many areas of global electronics manufacturing, competitors threaten its leading position. This is a concern not only for Samsung, but also for the society of the Republic of Korea. Samsung remains the largest donor to the South Korean economy, and the loss of market positions will directly affect the state of many affairs in the country.
Samsung CEO Lee Jae Young on a tour at ASML (second from left). Image source: businesskorea.co.kr
According to South Korean media, Samsung is closing the gap with other leaders in the production of RAM. At the end of the fourth quarter of 2021, Samsung had a 41% share of the DRAM market. It was followed by SK hynix (29.3%) and Micron Technology (24.3%). But the real threat to Samsung can be China, which spares no expense to strengthen the national production of semiconductors and, in particular, RAM.
Europe also made its move, announcing plans to capture 20% of world semiconductor production by the end of the decade. For this, European companies have a backlog, but whether there is enough «gunpowder» is still a question. Nevertheless, Samsung will have to consider the EU’s attempt to revive the production of chips, and the Europeans are unlikely to go to this with market methods. Protectionism and subsidies — Samsung still has to face this.
Also, South Korean sources note Samsung’s lag behind the main competitor in the contract manufacturing market — TSMC. But this is not only Samsung’s trouble, but the weakness of the factoryless chip development industry in the Republic of Korea. There are very few world-famous developers in this country, and Samsung can grow only together with customers. This applies to both the design and manufacture of chips, as well as packaging and testing. In this, Samsung is very, very far behind TSMС.
Image source: TSMC
According to TrendForce analysts, in the first quarter of 2021 TSMC held 56% in the contract manufacturing market of semiconductors, and Samsung — 18%. One of the secrets of TSMC’s success is an unaffordable investment in production. Thus, TSMC’s annual capital expenditures for many years are 300% higher than those made by Samsung. This year, for example, a Taiwanese company plans to invest at least $ 28 billion in the installation of 3nm production lines in Taiwan, and this is just one example.
A similar situation with the procurement of the most advanced scanners of the EUV range. At the end of 2021, Samsung owned 25 EUV scanners and TSMC approximately 50. Since 20221, TSMC has bought over 60% of the EUV scanners produced from ASML, and the rest was distributed among Samsung, Intel, Micron, SK Hynix and others. This is an example of trying to detach TSMC from the rest and Samsung. South Korean manufacturer is trying to iron out this by ordering an additional 20 more EUV scanners.
Finally, Samsung’s SoC and LSI (LSI) business is harmed by the fact that the company independently develops such components, for example, for smartphones. Therefore, the same Qualcomm and NVIDIA, for reasons of intellectual property protection, in some cases prefer to work with TSMC. But Samsung’s own production in the field of SoC Exynos is pressed both from above (by Qualcomm) and from below (by MediaTek).
Image source: Samsung
Another tricky situation in the field of image sensors. Here Samsung has to fight the Japanese Sony. The latter owns 45.1% of this market, while Samsung holds 19.8%. Samsung has a lot of interesting innovations in the form of 108-megapixel and 0.7-micron matrices, but Sony is Sony. The credibility earned for decades and high quality firmly attach customers to it. Samsung can’t rest on its laurels. Works are endless.