The production of American chip manufacturers has been delayed, and the 1.4nm process has been postponed. Has Samsung's advanced process foundry been completely crushed by Taiwan Semiconductor?

According to reports, the production start date for Samsung's (SSNLF.US) second advanced process chip manufacturing plant in the United States will be postponed from the originally planned 2024 to 2026, mainly due to insufficient demand from local customers.

The South Korean chip giant had previously announced plans to invest over $37 billion in Texas over the next few years. In December last year, the Biden administration approved subsidies of up to $4.7 billion under the CHIPS and Science Act.

A source familiar with the matter stated, “The delay in the construction progress of the (Taylor plant) is due to a severe lack of large customer orders. Even if equipment is introduced now, (Samsung) cannot immediately start production.”

Another executive familiar with the chip supply chain pointed out that Samsung, which has already established a factory in Austin, Texas, is not in a hurry to install chip manufacturing equipment for the new plant.

Is the chip foundry battle being crushed by TSMC?

Recently, Samsung's foundry division also announced a delay in the mass production of 1.4-nanometer semiconductors, setting the mass production target for 2029, two years later than previously planned. These moves seem to indicate that, in the current competitive landscape, Samsung has chosen not to engage in full competition with TSMC (TSM.US).

It is understood that Samsung's foundry division is facing financial difficulties. After recording an operating loss of 2 trillion won in 2023, the division's losses doubled to 4 trillion won last year. Analysts predict that the division may incur another loss of 3 trillion won in 2025.

In contrast, TSMC's performance continues to grow, with demand for artificial intelligence (AI) chips showing a "supply shortage" situation. Data shows that the global foundry leader achieved revenue of NT$320.5 billion (approximately $10.7 billion) in May, a year-on-year increase of 39.6%. Analysts expect TSMC's sales in the second quarter to grow by 39%.

Although TSMC faced similar challenges such as construction delays and labor shortages when building its first advanced process plant in Arizona, that plant achieved mass production by the end of last year and successfully secured large orders for AI chips from companies like NVIDIA (NVDA.US), AMD (AMD.US), Amazon (AMZN.US), and Google (GOOGL.US). TSMC Chairman and CEO C.C. Wei stated during the first quarter earnings call that the company sees very strong demand for AI-related chips from clients and expects revenue from AI chips (including AI GPUs, AI ASICs, and HBM products for AI training and inference data centers) to double this year.

Analysts point out that Samsung's foundry business also faces yield issues, which are a key indicator of chip manufacturing quality.

Joanne Chiao, an analyst at TrendForce, stated, “Samsung's foundry division previously lost orders due to unstable yields. Although yields have improved recently, the U.S. restrictions on high-end chip exports to China have compounded the issue, and current capacity utilization remains below the industry average.”

Despite this, due to low valuations and the U.S. lifting restrictions on chip design exports to China, Samsung's stocks listed in South Korea reached a nine-month high on Thursday (July 3). Goldman Sachs stated, “Although Samsung's second-quarter performance may fall short of market expectations and put pressure on short-term stock prices, investors have fully digested this.” From the perspective of risk-reward ratio, based on the 12-month forward PBR assessment, the stock has significant upside potential.

Similarly, Taiwan Semiconductor's American Depositary Receipts (ADR) trading price rose nearly 4% on Wednesday, reaching a historic high, making it one of the "most dazzling twin stars" in the global AI computing power industry chain alongside NVIDIA