Samsung Electronics' foundry business, which has lost billions annually for years, is finally catching a break as global tech giants scramble to reduce their dependence on Taiwan's TSMC. The shift is driven by TSMC's capacity constraints and the explosive demand for artificial intelligence chips, creating an unexpected opportunity for Samsung to reclaim market share and return to profitability.

Why Is TSMC's Dominance Creating an Opening for Samsung?

TSMC controls an overwhelming 72.3% of the global foundry market, with revenue of $35.86 billion in the first quarter of 2026, according to market research firm TrendForce. Samsung, by contrast, holds just 6.5% market share with $3.2 billion in revenue, creating a gap of 65.8 percentage points. However, this very dominance is now working against TSMC. As demand for advanced semiconductors has surged with AI expansion, TSMC's production capacity has become saturated, forcing major tech companies to reconsider their supply chains for the first time in years.

Big tech companies are traditionally conservative about switching suppliers, preferring stable, verified relationships. But the current supply crunch is changing that calculus. Intel CEO Lip-Bu Tan recently acknowledged that "semiconductor infrastructure actually is not catch up with the AI growth," highlighting a critical bottleneck affecting the entire industry.

Which Major Companies Are Now Turning to Samsung?

Tesla has emerged as the most visible example of this shift. The electric vehicle and robotics company is distributing production of its next-generation self-driving chip, AI5, between TSMC and Samsung Electronics, a strategic move to stabilize its supply chain and increase bargaining power. Following AI5, Tesla is also entrusting its AI6 chip to Samsung, with mass production planned to begin in the second half of 2027 using Samsung's advanced 2-nanometer process at its Taylor, Texas facility.

Beyond Tesla, other major players are exploring Samsung partnerships:

• Google: The tech giant is reportedly discussing entrusting production of key components for its 10th-generation Tensor Processing Unit (TPU), called Icefish, to Samsung's foundry business, with mass production targeted for 2028.
• AMD: The chip maker is in talks to entrust production of some of its central processing unit (CPU) products to Samsung as early as 2028, according to reporting from Nikkei.
• Other Candidates: Industry sources indicate additional major tech companies are reviewing collaboration with Samsung Electronics, though specific names have not been disclosed.

What Makes Samsung Attractive Beyond Just Capacity?

Samsung's unique position as one of the few major semiconductor companies operating both memory and advanced foundry businesses simultaneously is a significant advantage. Industry analysts believe this vertical integration could become a differentiating factor in the AI era, where designs linking Tensor Processing Units and High Bandwidth Memory (HBM) chips are becoming increasingly important. Google's interest in Samsung is partly attributed to Samsung's deep understanding of memory structures and specifications, including HBM technology.

Samsung was the first company in the world to begin mass production using the 3-nanometer gate-all-around (GAA) process, demonstrating technical leadership in advanced manufacturing. However, the company has struggled to convert that achievement into market share due to yield challenges and customer acquisition difficulties.

How to Evaluate Samsung's Path to Profitability

For Samsung's foundry business to capitalize on this opportunity and return to profitability, several critical factors must align:

• Yield Improvement: Samsung must demonstrate that its improved 2-nanometer process can achieve mass production yields comparable to TSMC's, as even minor differences in yield directly impact cost competitiveness and customer confidence.
• Taylor Plant Utilization: The company's new Texas facility must reach full operational capacity and secure sufficient customer orders to justify the investment and drive down per-unit manufacturing costs.
• Customer Retention: Samsung must convert current discussions with Google, AMD, and other companies into binding long-term contracts that provide stable revenue and justify continued investment in advanced process development.

The financial improvement is already visible. Samsung Electronics' foundry and System LSI business losses narrowed significantly from approximately $1.31 billion in the first and second quarters of 2025 to less than $653.6 million in the fourth quarter, according to industry sources. This improvement reflects recovery in mobile application processor and image sensor volumes, as well as increased orders from some foundry customers.

When Could Samsung Return to Profitability?

Market analysts are divided on timing. DS Investment and Securities forecasts that Samsung's System LSI and foundry businesses could swing to profit within 2026, with quarterly profits beginning at year-end and profitability gradually improving thereafter. However, Han Jin-man, president and head of Samsung Electronics' DS Division Foundry Business, took a more conservative stance, stating that a swing to profit for the foundry business does not look easy even in 2027, but adding that achieving profitability by 2028 is likely.

The broader semiconductor supply challenge extends beyond just foundry capacity. Intel CEO Lip-Bu Tan highlighted that memory shortages represent "the biggest shortage" in the industry right now, with companies scrambling to secure supplies. He also noted that helium, used throughout semiconductor fabrication for vapor deposition and cooling during etching, could become a significant bottleneck that few people are discussing.

Samsung's foundry business has posted losses of several trillion won annually for years, making profitability improvement a prominent challenge within the Samsung group. However, the convergence of TSMC's capacity constraints, AI chip demand, and major customers' desire to diversify their supply chains has created a genuine inflection point. Whether Samsung can convert this opportunity into sustained profitability depends on its ability to deliver competitive yields, secure major customer contracts, and scale its manufacturing operations efficiently over the next 18 to 24 months.