TSMC is projected to hold nearly 90% market share in the application processor (AP) manufacturing market, which serves as the brain for smartphones, with a process size of 5 nanometers (nm) or less. While TSMC essentially monopolizes the production volumes of AP market leaders MediaTek, Qualcomm, and Apple, it is expected to maintain an edge even in advanced processes below 2 nm. Samsung Electronics, which recently succeeded in stabilizing yield for its 3 nm process, is making a concerted effort to ramp up production at 2 nm to narrow the gap with TSMC.
AP belongs to the category of products where the advanced processes of foundry (semiconductor contract manufacturing) are applied first. As mobile functionalities become more advanced, there is a growing need for semiconductors that can not only boost performance but also maximize power efficiency. Most mobile APs integrated into premium smartphones worldwide are manufactured using advanced processes of 5 nm or less. Currently, the APs integrated into Apple iPhones and Samsung Electronics Galaxy series are produced at a 3 nm process. Starting this year, both Samsung Electronics and TSMC will produce APs to be featured in new products next year using a 2 nm process.
According to the market research firm Counterpoint Research on the 25th, TSMC's market share in the manufacturing of APs below 5 nm is expected to be around 87% this year and rise to 89% by 2028. Counterpoint noted, "As demand for performance and energy efficiency continues to grow, the demand for advanced processes is increasing," and stated, "Next year, one-third of global smartphone APs will be produced through 3 nm and 2 nm processes."
TSMC has gained an advantage over Samsung Electronics' foundry division, the only significant competitor in the AP manufacturing market below 3 nm, thereby monopolizing the chips of AP market leaders. It produces the A series chips used in Apple iPhones, Qualcomm Snapdragon series applicable to Samsung Electronics Galaxy smartphones, MediaTek's Dimensity series used in Chinese smartphones, and Xiaomi's self-developed AP. The global market shares of MediaTek, Apple, and Qualcomm in the AP market are 34%, 23%, and 21%, respectively, with these corporations accounting for about 80% of the global AP market share.
A semiconductor industry insider noted, "While Samsung Electronics did not fall significantly behind TSMC in the 4 and 5 nm competition, it struggled to increase yield during the introduction of the new Gate-All-Around (GAA) process for the 3 nm technology," adding, "During this process, customer attrition persisted, and it failed to produce its own AP, resulting in a loss of market share."
The prevailing outlook is that TSMC will maintain its advantage in the next battleground, the 2 nm market, for the time being. TSMC will mass-produce APs for Apple’s new products using the 2 nm process. APs from MediaTek and Qualcomm are also planned for mass production in the latter half of this year utilizing TSMC's 2 nm process. TSMC's production yield for the 2 nm process is stable at over 60%.
Samsung Electronics is also making significant efforts to catch up with TSMC by improving yield rates for processes below 3 nm. After facing challenges in stabilizing yield rates for advanced processes, Samsung Electronics has successfully mass-produced the Exynos 2500 for the Galaxy Flip 7, which is set to launch next month, using a 3 nm process. The company is focusing on manufacturing the Exynos 2600, which will be integrated into new smartphones launching next year, using a 2 nm process. Samsung Electronics' yield rate for the 2 nm process is reportedly above 40%.