Samsung Electronics is taking a different path than its rival SK Hynix in the AI semiconductor boom, sacrificing immediate profitability to build a diversified chip manufacturing business. While SK Hynix maximizes earnings from high-margin memory products, Samsung is investing heavily in foundry services and advanced process nodes, betting that this strategy will secure its competitive position as the semiconductor industry enters a new era shaped by artificial intelligence demand .

Why Is Samsung Choosing Stability Over Short-Term Profits?

The contrast between the two South Korean chip giants reveals a fundamental strategic divergence. SK Hynix's semiconductor division posted operating margins around 30% annually, with quarterly levels approaching 50%, driven largely by high-bandwidth memory (HBM) products used in AI accelerators . Samsung's semiconductor division, by comparison, operates at roughly 10% annual margins, weighed down by foundry business losses and heavy investment costs .

Yet Samsung is doubling down on this less profitable path. The company is pursuing early mass production of 2-nanometer processes and expanding its customer base, while also working to attract key customers with expanded supply of mobile application processors . This foundry-focused strategy reflects a calculated bet that the semiconductor market is entering what industry observers call "Foundry 2.0," an expanded competitive landscape where advanced packaging, design services, and manufacturing partnerships matter as much as raw process technology .

"Samsung Electronics is likely to grow in 2026, considering improvements in both volume and average selling price. Samsung is pursuing a strategy that prioritizes long-term stability through diversification, even at the expense of short-term profitability," stated Kang Kyung-soo, director at Counterpoint Research.

Kang Kyung-soo, Director at Counterpoint Research

What's Driving the Shift in Semiconductor Manufacturing?

The semiconductor industry is experiencing a fundamental realignment driven by artificial intelligence infrastructure investment. Memory chip demand has exploded so dramatically that it now exceeds logic chip orders for the first time, according to equipment maker ASML . During the first quarter of 2026, ASML reported that memory-related systems accounted for 51% of sales, while logic designs represented 49%, marking a historic reversal .

This surge in memory demand comes from HBM vendors including SK Hynix, Samsung, and Micron, who are racing to manufacture next-generation standards such as HBM3E, HBM4, and HBM4E for upcoming accelerators from NVIDIA and AMD . The global foundry market itself grew 16% year-over-year to reach $320 billion, driven by expanding demand for AI GPUs and application-specific integrated circuits (ASICs) across advanced processes and packaging .

How Samsung Plans to Compete in the New Foundry Landscape

• Advanced Process Technology: Samsung is rolling out 2-nanometer technology to compete with TSMC's dominance in cutting-edge chip manufacturing, aiming for a turnaround in next-generation process competition.
• Customer Diversification: The company is actively working to attract key customers and expand supply of mobile application processors, reducing dependence on any single customer segment.
• Volume and Pricing Strategy: Samsung is targeting simultaneous improvements in shipment volumes and average selling prices, which would enable the foundry business to enter a full-fledged growth trajectory.

The competitive landscape is shifting in ways that could benefit Samsung. With advanced node scaling approaching physical limits and performance gains increasingly shifting toward packaging technologies, AI customers are seeking to diversify their manufacturing partners beyond TSMC . SMIC is leveraging domestic demand, while Intel is strengthening its position by securing major AI clients, but Samsung's combination of advanced process nodes and existing customer relationships positions it uniquely .

Meanwhile, the broader semiconductor supply chain remains severely constrained. ASML's CEO Christophe Fouqet emphasized during the company's earnings call that "demand will continue to outpace supply for the foreseeable future," creating constraints across end markets from AI to mobile and personal computers . This supply shortage is forcing customers to aggressively add manufacturing capacity, which benefits equipment suppliers and foundries alike.

Christophe Fouqet

Samsung's willingness to sacrifice short-term profitability reflects confidence that the foundry market will reward diversification and scale. If the company successfully improves both manufacturing volumes and average selling prices in 2026, analysts suggest the foundry division could finally become a significant profit driver, justifying years of heavy investment . For now, Samsung is betting that patience in the foundry business will pay off far more than chasing maximum margins in memory chips alone.