Chinese technology companies face a very challenging geopolitical dynamic given the country's strained relations with the United States. They have to navigate these dynamics in order to remain competitive.
With the country's stance on China being a major issue during the upcoming US elections, these companies are concerned about potential stricter control policies that could impact their ability to access chipmaking capacity on advanced nodes. For many, Samsung is now the most viable alternative.
Samsung stands to benefit from these geopolitical dynamics
Reports suggest that Chinese chip designers are rushing to place orders with TSMC for chip production on advanced nodes. They anticipate stricter control policies being imposed by the US after the elections. These companies have also formulated a backup plan which involves shifting more orders to Samsung's foundry.
Their concern is that the US might ban Chinese companies from using Taiwanese foundries. Taiwan is a major US ally and is likely to follow the guidance from the US on imposing bans on Chinese IT companies. This would leave Samsung as the alternative. Even though it's based in South Korea which is another major US ally, Korean companies have been able to handle these geopolitical dynamics between the US and China more diplomatically.
TSMC's financial report for the second quarter of this year revealed that the company's revenue proportion from China has jumped to 16%, making it the highest among all Asia-Pacific countries. China is now the second biggest source of revenue for TSMC after North America. This suggests that Chinese chip design companies are placing orders in advance to stockpile chips to minimize potential disruption in the event that the new US administration places stricter controls.
Shifting orders to Samsung would enable these companies to diversify their production and ensure that in the event of TSMC being unable to provide them with production capacity, they have another viable option.
