Samsung underestimated competitors like TSMC, resulting in the loss of Nvidia's AI chip orders and a significant drop in stock prices.

Samsung's stock price reached nearly the peak level it had in 2021 in July this year, but it has since plummeted like an avalanche from September, with the stock price declining by more than 20% to date, and its market value has shrunk to 285.37 billion, overtaken by TSMC, which has a market value of 859 billion.

Even though Samsung is the number one brand in South Korea, smartphones and consumer electronics are still its main product businesses, but wafer semiconductors remain the biggest source of profit. As the chip business falls into crisis, investors feel uneasy and fearful. TSMC is the main manufacturer of chips for Nvidia and Apple, and Samsung cannot secure orders for Nvidia's AI chips, leading investors to worry that Samsung cannot compete with TSMC in chip foundry manufacturing, and even struggles to surpass the smaller SK Hynix Inc.

According to Bloomberg, overseas investors have significantly sold off Samsung stocks, amounting to as much as $10.7 billion. International fund managers indicate that Samsung is losing its technological leadership in the semiconductor business, making it difficult to regain the lead in the short term. Over the past few months, fund managers have been reducing their holdings in Samsung.

All news trends point toward Samsung's erroneous chip strategy and the successor's inability to keep up with the rapid demand in the AI market, causing Samsung to lose Nvidia's orders and have its market share taken away by TSMC. The following is a brief analysis summarizing the relationship between TSMC and Samsung, as well as Samsung's management difficulties.

Is TSMC a friend or foe of Samsung?

Korean media reported that Nvidia requested Samsung to change the design of its High Bandwidth Memory (HBM), causing supply chain delays. However, Samsung denied this rumor.

Many people believe that Samsung is lagging behind competitors in HBM manufacturing, leading Samsung to replace the head of its chip division. Since then, various speculations have emerged regarding why Samsung cannot win contracts from Nvidia. There are also rumors that Samsung sought to collaborate with its rival TSMC to produce HBM, as TSMC needs Samsung's silicon interposer to complete manufacturing, while TSMC is also facing component shortages. For Samsung, another challenge is to catch up with another competitor, SK Hynix Inc, whose HBM designs are compatible with Nvidia GPUs.

Samsung's successor is entangled in lawsuits, facing management challenges.

Lee Jae-Yong (Jay Y. Lee), the grandson of Samsung's founder, has been embroiled in multiple lawsuits over the years, was imprisoned for bribing aides of Park Geun-hye as determined by the South Korean Supreme Court, and was later pardoned. After returning to Samsung, he became the president of Samsung. Lee Jae-Yong was originally replaced in the semiconductor division by veteran semiconductor figure Jun Young-hyun. This personnel shake-up also indicates Samsung's preparation for management reform after losing market share.

This article discusses how Samsung underestimated competitors like TSMC, resulting in the loss of Nvidia's AI chip orders and a significant drop in stock prices. It first appeared in Chain News ABMedia.