Why Are Asia’s Chipmakers Selling Down on Sunny Forecasts?

We’ve got sunny predictions from Asia’s largest two companies today. And yet stocks are sinking. What gives?

Chip foundry Taiwan Semiconductor Manufacturing Co. (TSM) (TW:2330), best known simply as TSMC, today gives its September sales forecast, which gives us a read on its earnings due next week, on October 15.

TSMC is Asia’s largest company by market capitalization, at $2.4 trillion, and sixth-largest worldwide, just behind Amazon.com (AMZN) and ahead of SpaceX (SPCX) and Meta Platforms (META). 

Samsung Electronics (KR:005930) is the second-biggest Asian company. It splits its business units into a semiconductor “device-solutions” operation and a “device-experience” electronic-devices division.

Samsung is today giving its advance earnings guidance, three weeks before it is due to report Q3 earnings on October 29.

Records Tumbling

The numbers are amazing when put into historical context, with both companies posting record numbers that are also soaring year-on-year.

TSMC says that sales for September slipped 0.6% compared with the August tally. But, based on the prior monthly reports, that still means it posted record Q3 revenue of NT$1.49 trillion ($46.7 billion), up 50.5% year-on-year and beating market forecasts.

An estimate from data provider LSEG predicted Q3 sales of NT$1.46 trillion ($45.7 billion), while the company itself at its last earnings forecast sales of $44.6 billion to $45.8 billion.

Samsung meanwhile is today forecasting that Q3 sales will hit ₩195 trillion ($145.3 billion), generating operating profit of ₩107.4 trillion ($80.0 billion). It would mark the first time a Korean company has ever crossed ₩100 trillion, and is narrowly ahead of the LSEG estimate of operating profit of ₩106.1 trillion.

Samsung’s staggering numbers would mean its Q3 operating profit alone was more than double the total ₩43.6 trillion that it generated for the entire year, last year. The quarterly comparison is eight times the amount it made the same period in 2025.

Stocks Selling Off

Yet today we see TSMC shares slip 1.4% in Taiwan trade, while Samsung shares sank 2.4% in Seoul.

Samsung shares continued to struggle for direction all summer, and now stand at the same levels as in May. They soared to records in June only to surrender much of that advance. It is the first few months of this year that explain its year-to-date doubling, up 118.5%.

TSMC does continue to shift steadily higher. It is up “only” 60.9% year to date, but set and re-set its all-time record high on Tuesday and Wednesday, at NT$2,585.

Commanding Market Share

TSMC has a commanding hold on the chip foundry business, with 73% market share according to the latest figures from Counterpoint. It is a contract manufacturer producing physical semiconductors for “fabless” chip designers such as Nvidia (NVDA) as well as electronics designers such as Apple (AAPL).

Samsung is a distant second in the chip foundry business, with 7% market share, with Samsung Foundry also serving “fabless” chip designers. But it is the largest maker of semiconductors overall, making the most DRAM and NAND memory chips for its own smartphones and other devices as well as for use in the servers and architecture powering Artificial Intelligence (AI).

Samsung was late in moving into production of the cutting-edge High Bandwidth Memory (HBM) chips necessary for top performance in AI functions. But it is also now benefitting from rapid price hikes in its cheaper chips, which are commoditized and previously faced a glut of supply on the market. The rapid escalation of spending in AI has led to a shortage of all sorts of semiconductors.

Steadier Performance From TSMC

I’m not surprised to see TSMC deliver steadier stock performance while Samsung shares are more volatile. That explains the setback we have seen for Samsung over the summer, where it has sold down off June record highs like rivals SK Hynix (SKHY) (KR:000660) and Micron Technology (MU).

TSMC is my favorite Asian stock, a perennial pick for “Asian stock of the year,” although I’ve forced myself to broaden out since selecting it as my top equity pick for 2024.

There is little reason to expect that a company with such a commanding position in its industry — its foundry market share has risen to the current 73% from 51% in 2018 — will surrender its competitive advantage. TSMC is really agnostic about what companies are hiring it to make chips so long as they continue to demand production.

I have also built up a large position in the Roundhill Memory ETF (DRAM). DRAM has 74.8% of its exposure in those three memory makers: Samsung, Hynix and Micron. So the ETF too peaked in June at $80.72 only to correct significantly, as low as $44.85 by late July.

That holding is far more volatile than the steady advance for TSMC. DRAM seems to find resistance now around $60. It is trading today at $57.96 but appears to offer decent opportunities for entering a position or expanding when it’s below $60. We saw a mid-September rally that has now given way to selling.

Different Drivers

The memory stocks are more dependent on the surge in capital expenditure surrounding AI. If it weren’t for AI, Samsung wouldn’t be experiencing nearly the same demand for its cheaper chips.

The acceleration in prices has certainly slowed down. For memory chips, prices surged 80% to 90% in Q1, compared with the prior quarter, but that pace has decelerated to 10% to 20% in Q3.

Still, Samsung, Hynix and Micron have completely sold out their projected 2027 capacity for DRAM and HBM chips. Samsung and Micron are already both predicting that chip-supply imbalances will persist into 2028. They literally can’t make chips fast enough. Hynix CEO Kwak Noh-jung has even stated that severe memory shortages and tight supply could persist through 2030.

Investors will need to watch for moderation in memory prices for guidance on margins and earnings for the three big memory makers. Samsung’s projections look solid but markets are watching those signs that the rapid acceleration in prices is nearing its end.

Creating Its Own Problems

Samsung is in the strange position that the blistering escalation in semiconductor prices is causing issues for its consumer electronics. Its smartphone business made its first-ever operating loss in Q2, of ₩700 billion ($521 million), due in large part to higher memory prices. Analysts expect that loss to widen closer to $1 billion.

While today’s market reaction has been similar for TSCM and Samsung, we can expect far more volatile trading in Samsung shares. They will rally on signs of strong orders for memory, and increased capex by the hyperscalers who are fundamentally driving the shortness in memory supply. But the semiconductor sector sells down on any signs of weakness, or the hot air coming out of the AI bubble.

TSMC meanwhile should continue its steady progress. The big X factor will be its $265 billion expansion in Phoenix, where it intends to operate six fabs. The question will be whether it can operate at anything approaching the same margins it generates from production in Taiwan. We will also have the commentary from management at next week’s earnings offering more insight to margins moving into 2027.

At the time of publication, McMillan was long TSM and DRAM.