Samsung lures Qualcomm’s cutting edge chip orders by using price cuts for 5nm

South Korean tech company Samsung Electronics’ chip division called Samsung Foundry used discounted prices to lure American chip giant Qualcomm Inc. to make orders for its latest generation smartphone processors with the foundry. The 5nm process is Samsung’s latest manufacturing node; Qualcomm is using it for its 2020 Snapdragon smartphone system-on-chip. Qualcomm has been one of the foundry’s few big customers as the rest of the companies flock towards their rival, Taiwan Semiconductor Manufacturing Company (TSMC), for their products.

Chinese publication house ITHome has reported about the price cuts by Samsung for its advanced 5nm process to solicit Qualcomm’s order at a time when the demand for high-end processors grows and its supplies, via foundries, remains more or less the same.

According to multiple research firms, the chip sector will grow considerably in the coming time. Consequently, the competition between Samsung Foundry and its only rival TSMC is expected to grow in the future. TrendForce, a research firm, has estimated that global foundry revenue will increase by ~24% year-over-year in 2020, due to the pandemic-induced economic shifts creating a surge in demand for consumer electronics.

TrendForce also believes that the chip sector will continue to grow in 2021, but at a slower pace,  or roughly by 5%. During this time period, both the rival companies, TSMC and Samsung, are expected to increase their production capacity for the 5nm node, and Samsung is expected to catch up to TSMC but not yet overpower it slightly. Specific estimates believe Samsung’s 5nm capacity will trail TSMC’s by 20% next year, as Samsung increases production due to an inflow of orders from Samsung LSI’s and NVIDIA Corporation products.

Samsung share prices reach record high due to expected growth in Chip Industry

As analysts factored in the impact of a report from World Semiconductor Trade Statistics (WSTS), which forecasted a 5% growth for the chip industry this year, Samsung Electronics’ shares closed at a record high on the Seoul Exchange today. Despite TSMC’s tough competition, this record high was fuelled by optimism about the chip sector in the Korean industry.

In its report, the WSTS has estimated the total revenue for the chip sector pegged to be $433 billion. Of the 5% growth in the chip industry, 12% will be in the memory segment, where Samsung and SK Hynix, another Korean firm, are the dominant global players. Growth in the memory segment is followed by the sensor segment that is expected to post a 7.4% growth in 2020.

Worthy of note is that the firm also believes that growth in 2021 will outpace 2020. In 2021, the WSTS believes the semiconductor segment will grow by 8.4%, as it’s stimulated by the optoelectronics and memory sector, which are expected to post double-digit growth. Also in 2021, the memory segment is going to experience a demand growth which outpaces supply growth, and Samsung’s current share price has included all growth that its semiconductor arm is expected to witness next year.

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