"ChatGPT Craze, But When for 80,000 Won Electronics? Only TSMC Sees a Breeze"

Urgent Orders Rush to TSMC Immediately

Amid the global ChatGPT (conversational AI) craze, shareholders have mixed expectations that the semiconductor downturn will soon come to an end.

Taiwan's TSMC, the world's No. 1 foundry (semiconductor contract manufacturer), has posted record-breaking results for two consecutive months this year, while Samsung Electronics is expected to report weaker-than-anticipated operating profits for the first quarter.

[Image source=Pixabay]

According to foreign media reports including AP and Bloomberg on the 15th, TSMC recently announced that its February revenue increased by 11.1% year-on-year to NT$163.174 billion (approximately KRW 7 trillion). In January, it also recorded sales of NT$200.051 billion (about KRW 8.5 trillion), up 16.2% from the previous year.

Initially, the dominant forecast was that TSMC's first-quarter (January to March) performance could decline year-on-year for the first time in four years.

The situation changed after the launch of ChatGPT in November last year. Attempts to integrate ChatGPT into services by global big tech companies have continued. Semiconductors are essential for artificial intelligence deep learning, which involves processing and learning large amounts of data at once.

Unlike CPUs (central processing units) that process calculations sequentially, GPUs (graphics processing units), which handle multiple calculations simultaneously, are currently considered the most suitable semiconductors for ultra-large AI computations. GPU demand surged accordingly, and orders for AI semiconductor GPU market leader Nvidia have flooded into TSMC.

Taiwan's Commercial Times analyzed, "Due to the ChatGPT craze, urgent orders from major GPU companies such as Nvidia and AMD poured in, leading TSMC to deliver unexpectedly strong results." Nvidia uses both TSMC and Samsung Electronics foundries, but it is evaluated that TSMC has better yield (ratio of good products to total production) and production capacity, leading to increased orders to TSMC.

With urgent orders flocking to TSMC, the foundry market share gap between TSMC and Samsung Electronics is widening further. According to Taiwanese market research firm TrendForce, in the fourth quarter of last year, TSMC held a 58.5% share of the foundry market, ranking first, while Samsung Electronics ranked second with 15.8%. The market share gap widened to 42.7 percentage points, up from 40.6 percentage points in the previous quarter.

Samsung Electronics is going through a deeper deficit than expected. On the 14th, a securities firm report suggested that Samsung Electronics’ first-quarter operating profit, initially expected to be in the trillion-won range, would fall short of KRW 1 trillion. Eugene Investment & Securities forecasted that Samsung Electronics’ first-quarter sales would decrease 16% year-on-year to KRW 65.5 trillion, and operating profit would plunge 94% to KRW 8 billion.

Meanwhile, according to CNBC, Brad Lin, an analyst at Bank of America (BoA), raised the target price for TSMC, listed in New York, from $105 to $115. This is about 30% higher than TSMC’s closing price of $87.25 on the 10th. Samsung Electronics, which once aimed for the '100,000 won stock,' has recently been fluctuating around the 60,000 won level.