Samsung struggles to secure big clients amid US-China trade tensions

In South Korea, Samsung's contract chipmaking division is facing significant challenges in securing large US customers, despite the company's extensive investments in American manufacturing facilities. Recently, Samsung reported a remarkable 54 percent increase in exports to China from 2023 to 2024 as Chinese companies are keen to stockpile advanced artificial intelligence chips, largely due to stringent US export controls. A notable development in this situation includes Samsung's deal with Kunlun, Baidu's semiconductor subsidiary, where the company sold over three years' worth of logic dies, an essential part of AI chip production. However, the growing reliance on Chinese sales raises concerns for Samsung amid escalating trade tensions between Washington and Beijing, particularly regarding sensitive technologies. Last year, Samsung announced its investment of $40 billion to expand its advanced chip manufacturing and packaging facilities in Texas, supported by up to $6.4 billion in federal subsidies. This strategic move aimed to enhance Samsung's competitiveness against other players in the industry, particularly Taiwan Semiconductor Manufacturing Company (TSMC), which is investing significantly in new chip fabrication plants in Arizona. Despite these efforts, Samsung's contract chipmaking business has experienced a decline in market share, notably to TSMC, and continues to lag behind local rival SK Hynix, especially in the high bandwidth memory (HBM) market, critical for AI applications. SK Hynix has achieved record operating profits, surpassing Samsung for the first time in their history. While Samsung is currently the leading HBM supplier to China, there are concerns regarding the sufficiency of its supplies. Further complications arise as US export controls became more stringent in January, impacting Samsung's business prospects with Baidu and creating uncertainty. Samsung expresses adherence to US export regulations and remains cautious as it navigates these restrictions. Analysts note that Chinese companies are in desperate need of HBM and logic foundry capabilities, and as local competitors remain less competitive, the demand for Samsung's products continues, although they are considered inferior to offerings from competitors. This ongoing situation underscores the complicated landscape for Samsung as it balances its operations within China while facing significant challenges in the US market.