Samsung seeks to reassure markets over semiconductor competitiveness

Samsung Electronics has reassured markets over the competitiveness of its semiconductor business, after a series of warnings from investors, analysts, and employees that the Korean company is losing its technological edge.

The South Korean conglomerate is the global market leader in memory chips, and harbours the ambition of closing the gap on key rival Taiwan Semiconductor Manufacturing Company in the foundry sector, where companies are contracted to produce chips designed by others.

Illustrating the company’s importance to the global economy, US president Joe Biden visited its Pyeongtaek semiconductor plant during a visit to South Korea in May.

But earlier this year the company lost its two biggest foundry customers, Qualcomm and Nvidia, to TSMC, according to analysts, who have suggested the companies were disappointed by Samsung’s inability to deliver stable volumes of 4-nanometer and 5-nanometer chips that make up computers’ central processing units.

TSMC captured 54 per cent of the foundry market in the first quarter of 2022, more than three times Samsung’s market share, according to market researcher TrendForce.

Last year, Samsung announced a Won171tn ($151bn) investment plan for foundry chips by 2030. But its Taiwanese rival is planning to invest up to $44bn this year compared with Samsung’s estimated $12bn, according to Seoul-based SK Securities.

And in the D-Ram business, traditionally Samsung’s strength, rivals Micron Technology and SK Hynix have been quicker to unveil some of the most-advanced chips. D-Ram technology enables short-term storage for graphic, mobile and server memory chips.

Issues with its flagship Galaxy S22 smartphone, launched in February, suggest that the South Korean group is also falling behind Apple on hardware competitiveness, while the performance and sales of Samsung’s Exynos 2200 mobile processor chips, which were launched this year, have been disappointing.

Investors including hedge funds Petra Capital Management and Dalton Investments have raised concerns about what they describe as Samsung’s rigid corporate culture under the leadership of Lee Jae-yong, Samsung’s vice-chair and de facto leader.

They argue that the company has prioritised 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 Chan Lee, managing partner at Seoul-based Petra Capital Management.