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Semiconductors

Samsung overtakes TSMC as top chipmaker by market cap

By Dec 27, 2020 (Gmt+09:00)

Samsung overtakes TSMC as top chipmaker by market cap 


Samsung Electronics Co. has reclaimed its throne as the world's largest semiconductor company, overtaking global foundry giant Taiwan Semiconductor Manufacturing Co. (TSMC).

The South Korean chipmaker's total market capitalization stood at approximately $475.1 billion on Dec. 24, above TSMC, which posted a market cap of around $470.1 billion.

This is the first time for Samsung Electronics' market cap to exceed TSMC's since July when the Taiwan-based chipmaker became the first semiconductor company to top 400 trillion won ($364 billion).

Until the third quarter, TSMC was considered an unrivaled performer in the global semiconductor industry, thanks to its solid performance driving up its share price by 63% in the second half of the year.

Despite a hiccup in May due to US sanctions against the company's second-largest client Huawei Technologies Co., the Taiwan-based chip giant secured hefty orders from Apple and maintained its top spot.


FOUNDRY BECOMES DECISIVE FACTOR IN SAMSUNG'S ASCENT

But in the final stretch of the year Samsung Electronics has retaken the lead, supported by its growing foundry business. The company clinched a deal to manufacture Snapdragon chips, using its 5-nanometer technology, for Qualcomm Technologies Inc. and won orders to manufacture gaming chips for Nvidia Corp.


Nvidia's latest gaming chip, the RTX3080
Nvidia's latest gaming chip, the RTX3080


Samsung Electronics' widespread portfolio of DRAM, foundry and 5G chips raised the company’s growth potential ahead of the anticipated DRAM supercycle next year. 

In addition to securing profitable deals, system chip and memory chip prices began to recover in the fourth quarter, which boosted the company's performance.

This month, Samsung Electronics' share price rose by 16.6%, and the company's market cap topped 500 trillion won as of Dec. 24.

In terms of market share, TSMC is still comfortably ahead with 55.6% compared to Samsung Electronics’ 16.4%. But industry watchers say that the Korean company is in the lead regarding revenue growth thanks to its position as an integrated device manufacturer (IDM) as well as its balanced portfolio, which has been highly valued in the market. 

Next year looks even more promising, backed by orders for 5G chips and graphic processing units (GPU) in line with the growing market. Samsung Electronics is likely to see a 20% increase in foundry revenue from this year’s estimate of 15.4 trillion won.

The industry expects Samsung’s share of the global foundry market to rise above 20% in 2021.


Samsung Electronics' foundry plant in Hwaseong 
Samsung Electronics' foundry plant in Hwaseong 


The global semiconductor landscape has seen a drastic change this year. Based on market cap, US-based Intel Corp. descended from third to fifth place globally with $192.9 billion market cap, replaced by US-based chipmaker Nvidia with $321.7 billion market cap.

The Netherlands-based chip equipment maker Advanced Semiconductor Material Lithography (ASML) rose to fourth place with a market cap of $202.5 billion.


ALL EYES ON DRAM SUPERCYCLE

Samsung Electronics’ memory chip business has been in the spotlight of late, with the DRAM market readying to enter a boom cycle next year.

The Korean company is the market champion in the global DRAM and NAND flash markets, holding 41.3% and 33.1% market shares, respectively, according to market research firm TrendForce.

Until November, the memory chip industry had not fared well, with the DRAM spot price falling from $3.31 in June to $2.85 in November as major clients cut back on orders and server companies curbed investment in fear of a global recession. Such factors led to a downward trend in memory chips.

But things took a turn this month, with the DRAM spot price swelling by 24.5% to $3.45 from $2.77 at the end of November, auguring well for the DRAM supercycle next year.

Demand for mobile DRAM has also recovered thanks to 5G smartphones, alongside a rise in server DRAM purchases from Google and Amazon.

“We're entering a global semiconductor industry upcycle. Memory chips are seeing a significant rise in demand owing to AI and 5G,” said Kim Yang-paeng, a researcher at the Korea Institute for Industrial Economics & Trade.


Samsung semiconductor booth at the International Semiconductor Exhibition (SEDEX) 2020
Samsung semiconductor booth at the International Semiconductor Exhibition (SEDEX) 2020


ROSY OUTLOOK FOR 2021 EARNINGS

Samsung Electronics expects its earnings to post fresh highs next year, as the semiconductor unit isn’t the only thriving business for the company. Other core businesses, including smartphones and appliances, are also in the limelight with the GalaxyS21 and the mini LED TV set to launch early next year.

Market consensus for Samsung Electronics’ 2021 revenue is around 260 trillion won with an operating profit of 47 trillion won, up by 9.2% and 26.2%, respectively, according to financial data provider FnGuide. Some speculate that the company’s operating profit could top 50 trillion won.

The company's semiconductor business is expected to see its operating profit climb by 50% and hover around 30 trillion won for 2021.

Meanwhile, Samsung Electronics' fourth-quarter earnings may not be as impressive as its operating profit is likely to come in around 9.9 trillion won, about 20% lower than the 12.4 trillion won from the previous quarter due to weakened chip prices between October and November, reduced smartphone shipments and a drop in the won to dollar exchange rate.


Write to Jeong-soo Hwang at hjs@hankyung.com

Danbee Lee edited this article.

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