Samsung‘s struggles in making competitive flagship smartphone chipsets aren’t unknown. The company has been unable to go neck-on-neck with its arch-rival TSMC in the foundry space in recent years. So much so that Samsung investors are worried that it is losing its grip on the semiconductor market and may slip further behind TSMC in the years to come.
Samsung is falling behind the competition in the semiconductor market
According to Financial Times, Samsung investors, employees, and analysts have warned the company that it is losing its technological edge in the foundry space. The firm lost two major clients, Qualcomm and Nvidia, to TSMC earlier this year. It was reportedly unable to make a stable delivery of 4nm and 5nm chips because of its poor yield rates. Earlier reports suggested its yield rate for the Snapdragon 8 Gen 1 to be just 35 percent. This means only 35 chips out of 100 manufactured pass the quality testing. TSMC, on the other hand, had a yield rate of 70 percent for the same chipset, double that of Samsung.
No wonder TSMC captured a whopping 54 percent share in the foundry market in Q1 2022. The figure is more than three times Samsung’s market share. Investors have raised concerns that the Korean firm’s struggles in this space are a result of internal issues. They are questioning the leadership of the company’s vice-chair and de facto leader Lee Jae-yong. Under his management, Samsung has reportedly prioritized “rapid development and cost savings over quality and innovation.”
“Designing their own chips requires creativity and engineering prowess but Samsung’s risk-averse culture has deepened under Lee Jae-yong’s leadership, with engineers avoiding new attempts at innovation,’ said an industry expert.
Samsung is the world’s largest maker of memory chips. But when it comes to the foundry segment, its struggles are visible. Not just the yield rates, even its fabrication chip tech has proved inferior to that of TSMC. The latter’s chips are more power-efficient and are also better at thermal management. This has been the story for the past several years. So it was only a matter of time before investors start pointing fingers at it.
Samsung employees are also questioning its leadership team
Along with investors, Samsung’s employees are also questioning its leadership team. According to the new report, a junior engineer from the firm’s semiconductor technology development team recently complained that researchers are given “impossible targets to develop new technology and products” and put under enormous time pressure.
“It seems that the top decision maker is not able to grasp the root cause of the problems,” the engineer said in a letter to Samsung’s leadership. “I’ve heard quite a few stories of ‘crisis’ but I think this moment is more dangerous than ever.”
These internal issues are growing as Samsung’s business units start blaming each other. The mobile division has reduced the use of in-house Exynos processors due to the performance gap over Qualcomm solutions. The next-gen Galaxy S23 flagships will only use Snapdragon processors. As such, the Korean company’s share in the processor market may further decline next year. Its share has almost halved since 2019. It only captured 6.6 percent of the market last year. Qualcomm topped the chart with a 37.7 percent share, followed by MediaTek (26.3 percent) and Apple (26 percent).
Samsung last year announced an investment of more than $150 billion in the foundry sector. The company is building new chip plants in the US, with President Joe Biden personally urging it to expand production in the country. He wants to reduce reliance on Taiwanese firms as gaming growing tensions with China. Biden began his South Korea tour earlier this year at a Samsung chip factory in Pyeongtaek. It remains to be seen whether the Korean behemoth can resurrect its foundry business anytime soon.