Potential U.S.-TSMC alliance to pile more pressure on Samsung Electronics

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Potential U.S.-TSMC alliance to pile more pressure on Samsung Electronics

Published: 17 Feb. 2025, 18:06

JIN EUN-SOO
[email protected]

Audio report: written by reporters, read by AI

A smartphone with a Intel logo displayed is placed on a computer motherboard in this illustration from March 6, 2023. [REUTERS/YONHAP]

TSMC’s possible takeover of Intel’s contract manufacturing business for chips is likely to strike deeply at Samsung Electronics' desperate efforts to secure Big Tech clients in the United States.

The Donald Trump administration’s “Made in America” initiative in the chip realm is expected to fortify the alliance between Taiwan and the United States, pressuring TSMC to salvage Intel’s money-losing foundry business.

The initiative would eventually aim for memory chip manufacturing on U.S. soil, according to industry experts, putting a dent in Korea's unrivaled leadership in memory chips.

"The only manufacturing facilities the United States has for memory chips are Micron's," said Kim Yang-paeng, a senior researcher at the Korea Institute for Industrial Economics & Trade.

"Asking Samsung to build memory chip facilities in the United States is an expected course of action."

Officials from Trump’s office recently met with TSMC to suggest that it acquire Intel’s U.S. manufacturing facilities, to which the Taiwanese chipmaker showed a “receptive” attitude, according to Bloomberg last week.

TSMC shareholders are apparently unhappy about the plan because salvaging the unit would cost money and stretch its workforce, and, most of all, pose a risk of a critical technology leak.

The Taiwanese firm is an industry leader in the foundry business with a 64.9 percent market share as of the third quarter of last year. It also has an edge over Intel in advanced nodes, being able to manufacture 3-nanometer chips at a stable yield while that of Intel's hasn't reached that milestone yet.

“The Trump administration could have been mulling tariff hikes or renegotiations for chip subsidies in order to pull this deal through,” said Ahn Ki-hyun, executive vice president of the Korea Semiconductor Industry Association.

“It is an unattractive deal for TSMC in terms of business perspective, but it would be hard to say no to it.”

Intel, which stands at the heart of U.S. chip competitiveness, re-entered the foundry business in 2021 under the leadership of the now-ousted Pat Gelsinger.

Despite pouring a hefty sum of money into the chip manufacturing business, the unit ended up sitting on $7 billion operating loss in 2023, before floating plans to spin it off. It also laid off 15 percent of the workforce as a result.

The deal could be beneficial in some aspects, depending on how it is structured.

If TSMC purchases Intel’s chip plants, it would be “TSMC seizing the hegemony, which couldn’t be bad for TSMC,” said senior researcher Kim.

No matter how the deal turns out, however, the two countries’ alliance would inevitably hurt Samsung Electronics.

Samsung’s share in the foundry business has been trending downward, with its grip falling into the single digits at 9.3 percent in the third quarter of last year, Trend Force data said.

That is not even the bottom, however, with China’s SMIC chasing closely as it is ramping up competitiveness in the manufacturing of legacy chips. SMIC held on to 6 percent of the market.

“Securing Big Tech clients is crucial for foundry,” said Prof. Lee Jong-hwan of system semiconductor engineering at Sangmyung University.

“If the Intel-TSMC alliance absorbs the big U.S. clients, Samsung Electronics’ chance of expanding its market share will become even slimmer.”

Samsung’s mounting loss in foundry, speculated to be at 2 trillion won ($1.38 billion) last year, led to speculation that chief Lee Jae-yong would spin it off, but the tycoon dismissed the idea by saying it is still “hungry” for growth.

The chip-manufacturing unit of Samsung has been struggling to secure U.S. clients despite building a $37 billion facility in Taylor, Texas. It delayed its manufacturing time period of it from 2024 to 2026.

BY YI WOO-LIM, JIN EUN-SOO [[email protected]]