EUArticles (4)
What are stocks?
<p paraeid="{3905333e-d6ad-49f8-b2a7-46ee067cf7da}{244}" paraid="1767617311">Most people are familiar with the term stock market – it’s a market where you can buy or sell stocks, but there is much more to it than just that. <br /> </p> <p paraeid="{d02067f4-da4e-4032-b7cc-a7294b695deb}{17}" paraid="112530676">Almost every country in the world has its own stock exchange or even multiple exchanges where people can buy and sell stocks, among other financial instruments. <br /> </p> <p paraeid="{d02067f4-da4e-4032-b7cc-a7294b695deb}{33}" paraid="241417236">These exchanges are a regulated environment. In certain countries, the same regulatory bodies that licence online brokers oversee transactions on their respective stock exchanges to ensure transparency and prevent fraud. For example, the United Kingdom’s largest stock exchange, the London Stock Exchange (LSE), is regulated by the Financial Conduct Authority (FCA). Every time a stock is traded (bought or sold), it is monitored by this regulator for discrepancies, ensuring compliance with its policies. <br /> <br /> <br /> What are stocks, and how are they different from shares and equities? In this article, we’ll dive deep into all these details and explain everything a trader needs to know about stocks.</p> <h2>Stocks vs shares vs equities</h2> <p paraeid="{d02067f4-da4e-4032-b7cc-a7294b695deb}{109}" paraid="787304823">A stock is a representation of a company’s ownership. The term stock is often used interchangeably with the term share. However, there is a difference. Stock implies ownership in general, regardless of its size, while a share is a unit of measurement of this ownership. Equity is another term commonly used, and it refers to the total ownership stake in a company without any debt involved. <br /> </p> <p paraeid="{d02067f4-da4e-4032-b7cc-a7294b695deb}{143}" paraid="37962362">For example, you may often see your balance being called equity on trading platforms. In this case, it’s the total amount of funds you own after deducting any loss you may incur if you have open trades. <br /> </p> <p paraeid="{d02067f4-da4e-4032-b7cc-a7294b695deb}{159}" paraid="2087999960">To sum up all three terms – if Apple Inc. were to have 1,000 shares only and you owned 100 of them, you would also own Apple’s stock or a part of its equity. </p> <p><br /> <br /> <img alt="TFMKT-4086-Image1-1.png" src="/getmedia/ec1a6c59-0298-47bd-a30c-d9c992e3979e/TFMKT-4086-Image1-1.png" title="TFMKT-4086-Image1-1.png" /></p> <h2>How does a stock work?</h2> <p paraeid="{d02067f4-da4e-4032-b7cc-a7294b695deb}{186}" paraid="772652413">Most companies start as privately held. It can be either an individually owned business, where all assets and hence all the stock belong to one person, or a partnership with two or more owners, where stock is divided between them. In both cases, a company may seek to raise capital and attract investors to expand its coverage and services. To make an investment opportunity appealing, the business raising capital will offer partial company ownership in exchange for funding. In simple words, third-party investors receive some ownership of a company for providing their capital to it. <br /> </p> <p paraeid="{1199522b-70e2-4b7d-9954-8024da34ca44}{5}" paraid="1105466596">For example, let’s say your friend opens a startup, and you provide USD 10,000 to help it grow, and receive partial ownership in this startup on pre-defined terms and conditions in return. As you now are a shareholder, you will receive your share of the profits, and have the right to vote on decisions. If a startup does grow into an established company, more capital might be needed to allow the firm to grow. At this stage, a company can go public and sell shares on the stock market to raise more capital. <br /> </p> <p paraeid="{1199522b-70e2-4b7d-9954-8024da34ca44}{81}" paraid="2146976948">This is when a company gets listed on a stock exchange and goes through an Initial Public Offering (IPO) – the process of devising an investment plan, setting share prices, their total number and making them available to the public. </p> <h2>How many shares can a company have?</h2> <p>An individually owned business can have as little as one share representing 100% of a company’s value and belongs to the owner – that’s the minimum possible. Once a company goes public, there is no limit to the number of shares it can issue. Apple, for example, has billions of shares. However, the law of supply and demand works in this case, too, and the more shares there are available on the market, the lower they are usually priced. That’s why large corporations issue shares gradually, carefully evaluating demand to prevent a significant price drop. Apple added new shares to the market only five times in over 40 years, every time making sure that investors anticipated it.</p> <h2>Types of stocks</h2> <p>Besides private and public stocks we discussed above, the two main types of stocks are common and preferred.</p> <h3>Common stocks</h3> <p>Common stocks are the most popular type of issued stocks. In most cases, shares available to the public belong to this category. Common stocks tend to be more volatile than preferred stocks, offering higher potential reward but also higher risk to traders. The holders of common stock have voting rights and the right to receive dividend payments, although the latter is not guaranteed.</p> <h3>Preferred stocks</h3> <p>On the other hand, preferred shareholders tend to offer more predictable income, with higher and fixed dividend payouts. However, they usually always come with no voting rights and limited growth. In case a company goes bankrupt, the holders of preferred stock are also prioritised in being repaid compared to common stock owners. <br /> <br /> <img alt="TFMKT-4086-Image2-1.png" src="/getmedia/44b32dcd-b4d6-4ceb-936b-de9c739a910b/TFMKT-4086-Image2-1.png" title="TFMKT-4086-Image2-1.png" /></p> <h2>What is a dividend?</h2> <p paraeid="{1199522b-70e2-4b7d-9954-8024da34ca44}{232}" paraid="1690159432">A dividend means a distribution of a company’s earnings or profit to shareholders as a reward for their investment. It is usually paid quarterly in cash or in the form of additional shares. However, not all companies pay dividends and some reserve the right to reinvest their profit into the company’s growth instead of sharing it with investors. For example, high-growth companies usually choose to reinvest instead of paying dividends. Even some of the giants that are profitable, like Amazon, Meta and Google (Alphabet), follow the same policy to ensure continuous growth. <br /> </p> <p paraeid="{acb2c30d-64dd-4b07-82ea-8b974d18a721}{47}" paraid="1759198674">When a company announces a dividend distribution, investors are only deemed eligible if they have bought shares before a set date, called the ex-dividend date. The average dividend payouts vary but typically fluctuate between 2% and 5% of a share price depending on the company’s industry. For example, in the energy sector, dividends average 5%, while healthcare companies often pay a little over 2%. <br /> <br /> <img alt="Group-63232.png" src="/getmedia/6c3e696d-2936-48b7-a3e7-cd0a5821df92/Group-63232.png" title="Group-63232.png" /></p> <h2>What exchanges can a company list its stock on?</h2> <p>Most companies can be listed on any exchange in the world as long as they meet the minimum requirements set by the exchange. The main defining factor in choosing an exchange often depends on where the target audience (potential investors) are located. Hence, most companies get listed on an exchange in the same country where their headquarters are. That’s why Apple is listed in the US, Mercedes-Benz in Germany and Xiaomi in China.<br /> <br /> Some companies list their stocks on more than one exchange in pursuit of a larger exposure. For example, the two major US stock exchanges – New York Stock Exchange (NYSE) and Nasdaq – have hundreds of non-American companies listed on them.<br /> <br /> These exchanges are the largest in the world by market capitalisation, meaning they have a lot of companies listed on them, including the largest corporations. This, in turn, leads to high liquidity and market movement that presents many trading opportunities, attracting potential traders and investors.<br /> <br /> Not sure what’s the difference between stock trading and investing? Head to our next article where we explain it in detail and show <a href="/en/trading-academy/stocks/how-to-trade-stocks">how to trade stocks with CFDs</a>.</p>
How to trade stocks
<p>Stock trading has always been a popular activity to generate passive income, and the COVID-19 pandemic only brought more demand to it. According to various research, stuck at home or laid off from their jobs, people started actively looking for other ways of entertainment and income.<br /> <br /> The user count of stock trading apps has almost tripled since 2019, and websites with educational content on financial markets have seen a four-times surge in the number of visits. However, not many websites offer a beginner-friendly explanation of the concept.<br /> <br /> In our article, we aim to help inexperienced traders understand how to trade stocks as we explore the basics of it and focus on one of the most popular ways of doing it – stock trading with CFDs.</p> <h2>What is the difference between stock trading and investing in stocks?</h2> <p>First of all, let's establish the difference between stock trading and investing in stocks, as both versions are widely spread.<br /> <br /> Many traders use these terms interchangeably or call any stock-related activity trading. It makes sense because whether it's day trading with a quick turnaround or a long-term investment portfolio, the end goal is the same – to make a profit once the price grows.<br /> <br /> However, there are significant differences. For example, you can trade stocks without buying them. Moreover, it is also possible to benefit when a stock price goes down, not only when it's gaining value. That's what sets trading and investing apart.<br /> <br /> At ThinkMarkets, we use the term investing when a trader physically buys an instrument. Investing in stocks means buying a company’s shares and acquiring its ownership along with the right to receive shared profit if their stocks pay <a href="/en/trading-academy/indices/stock-market-indices ">dividends</a>. It usually implies having a long-term plan – most investors hold their shares for an extended period of time, from several days to years or even decades, selling them for profit when their price grows significantly. Some buy and sell their shares regularly to get smaller but regular profits.<br /> <br /> On the other hand, other traders speculate solely on short-term price movements of stocks without buying them. We call this activity trading, and one good example of it is CFD trading.</p> <h2>Why trade stocks with CFDs?</h2> <p>CFD trading is very popular among traders because it offers multiple benefits, such as:<br /> </p> <ul> <li>Opportunity to capitalise on both rising and falling prices by going long or short;</li> </ul> <ul> <li>Accessing the underlying stock at a lower cost than buying it outright via leaverage;</li> </ul> <ul> <li>There are no ownership requirements, providing cost-effective and flexible access. </li> </ul> <p><br /> In addition, CFD trading is available on all global markets, making it an attractive way to trade multiple instruments at once.</p> <h2>How to trade stocks with CFDs</h2> <p>If you are not familiar with the concept of CFD trading, we discuss it in detail in our <a href="/en/trading-academy/cfds/what-are-cfds">CFD trading: a beginner’s guide.</a><br /> <br /> To give a brief example, let’s say you decided to trade Apple shares. The current market price is USD 152.00.</p> <h3>Going long</h3> <p>If your research suggests that the price is going to increase, you open a long CFD position (buy). Keep in mind that when you trade stocks with CFDs, one contract usually equals one share.<br /> <br /> The price does go up to USD 162.00. The difference – USD 10, is your profit. If your prediction turns out incorrect and the price drops to USD 142.00, you lose USD 10.<br /> <br /> <img alt="" src="/getmedia/b1f80809-53c2-4530-a173-0bc72696d9fa/article-how-to-trade-stocks-long.webp" /><br /> <br /> In the news reports, you may often hear such an event described as the price moved by ten points, not dollars. It’s because price movements on the stock market are measured by points, where each point equals USD 1:<br /> <br /> <img alt="" src="/getmedia/d7650b39-5092-497a-acf8-48b96a9e7cf7/article-how-to-trade-stocks-long-formula.webp" /></p> <h3>Going short</h3> <p>In the opposite scenario, you can place a short CFD trade (sell) if you think the price is going to go down. If it does – you get profit, and if it moves in the opposite direction, you incur a loss.<br /> <br /> <img alt="" src="/getmedia/76d9c0a5-929f-41d7-af3a-d1d05dc1b2a6/article-how-to-trade-stocks-short.webp" /><br /> <br /> As you can see, no matter whether the stock price appreciates or depreciates, you have an opportunity to capitalise on its price movements because you can trade in either direction with CFDs.<br /> <br /> In this example, the AAPL abbreviation is Apple’s stock ticker you’ll see across all trading platforms. It’s a unique code used by companies for easier identification, the same as USD stands for the United States Dollar in forex.</p> <h3>Spreads</h3> <p>It is also important to note that depending on whether you open a long or short position, the initial price will slightly differentiate. It happens because every financial instrument has two prices in trading: buy (bid) and sell (ask).<br /> <br /> A sell price indicates how much money you would receive if you were to sell a stock, should you own it. On the other hand, the buy price means how much you'd need to pay to buy a stock. In CFD trading, both numbers mean the price of a contract you can open. The difference between these two prices is called the spread, and it is the fee a broker charges for facilitating the transaction.<br /> <br /> The image below shows a spread of the Apple stock – 9.0 or 90 cents.<br /> <br /> <img alt="" src="/getmedia/0d85eb30-6f54-4138-9d19-79d65f072b7d/article-how-to-trade-stocks-spreads.webp" /><br /> <br /> Keep in mind that the placement of a decimal point is different in index trading and trading stocks. The same 9-cent spread in stock trading would be marked as 0.9.</p> <h3>Leverage in stock CFD trading</h3> <p>CFD traders usually trade stocks with leverage. Leverage means funds borrowed from a broker to open a larger position. To place a trade with leverage, you only need to cover a small deposit called a margin. The bigger the leverage, the smaller the margin.<br /> <br /> For example, if you trade with 30:1 leverage in our previous example, you will only need to pay one 30th of USD 152.00, or USD 4.56, to trade a share of Apple worth over a hundred dollars.<br /> <br /> <img alt="" src="/getmedia/9f8ea23b-31bb-4185-bb37-33774d89a927/article-how-to-trade-stocks-leverage.webp" /><br /> <br /> Your profit doesn’t get smaller. It’s still the same USD 10, which is more than your initial deposit. It’s important to understand that if your trade is unsuccessful, the loss will also remain the same and exceed your initial deposit. That’s why using <a href="/en/trading-academy/cfds/risk-management-tools-in-cfd-trading">risk management tools</a> like stop loss and take profit is crucial in CFD trading.<br /> <br /> However, before you start trading stocks with real money, it's advisable to practice your skills and learn how to use risk management tools on a risk-free demo account pre-loaded with virtual funds. ThinkMarkets' proprietary trading platform, <a href="/en/platform/download-thinktrader">ThinkTrader</a>, offers over 3,000 global stocks and favourable trading conditions for beginners and experienced traders.<br /> <br /> If you are looking for tips on identifying trading opportunities on stocks, check out our <a href="/en/trading-academy/stocks/what-affects-stock-prices">What affects stock prices?</a> article, where we explain factors affecting their prices.</p>
What affects stock prices
<p paraeid="{45bdec93-b9d8-4864-bd9d-c0a3f0631972}{159}" paraid="679473590">Over the long term, the stock market tends to appreciate in value. This is because as the economy grows, companies' earnings increase, which helps drive stock prices up. If you look at the chart of a popular index like the S&P500, which tracks the 500 largest US companies, you'll see that its value is higher today than it was 10, 20 or 30 years ago, even when you take into account stock market crashes, like the ones we saw in 2000, 2008, and 2020.These crashes can be hard to stomach for long-term investors as the capital gains they have generated over the years take a hit. The good news is over the long term, the stock market tends to bounce back, which means investors can recoup these losses. </p> <p paraeid="{af858a94-1cd1-433e-a49b-06c9a8d210b5}{36}" paraid="1056185374">On the other hand, <a href="/en/trading-academy/cfds/what-are-cfds">CFD traders</a><a href="/en/trading-academy/cfds/what-are-cfds"> </a>value a market crash as much as a rally because both present trading opportunities for them. In this article, we’ll explain how to identify these opportunities as we go through the main factors affecting stock prices. </p> <h2>Main factors influencing stock prices</h2> <p>All the factors that may indicate an upcoming price change of a stock can be divided into three groups: macroeconomic, microeconomic and human.</p> <h3>Macroeconomic factors</h3> <p>All the factors that may indicate an upcoming price change of a stock can be divided into three groups: macroeconomic, microeconomic and human.</p> <img alt="" src="/getmedia/5a527f95-9404-4bc3-96a5-ab43534f97ff/article-what-affects-stock-prices-macro.webp" /> <p><br /> As the COVID-19 pandemic proved, the global and local state of the economy can significantly influence stock prices. This influence can be both positive and negative, depending on the nature of the crisis. For example, tech companies like Amazon or Apple were thriving while the borders were shut and people were stuck at home, while their non-tech counterparts were tanking one after another.<br /> <br /> With a crisis like that, it’s quite hard to predict where exactly it’s going to hit. Although big market crashes are an exception, not the common stock market’s nature, and hence have to be analysed individually.<br /> <br /> The day-to-day stock market performance is much easier to analyse. Over the years, traders and analysts identified price movement patterns and established macroeconomic factors that can indicate an upcoming price change. Here are some of them:</p> <p><strong>Inflation and interest rates</strong></p> <p>These two factors are usually linked together as they are correlated. Increasing inflation usually leads to increasing interest rates and vice versa. In a nutshell, the lower these rates are compared to their previous data, the better it is for stocks as it becomes cheaper for consumers and businesses to access credit. Traders usually keep an eye on the <a href="/en/economic-calendar">economic calendar</a> to follow these announcements and place their trades accordingly. <br /> </p> <p><strong>Gross domestic product (GDP)</strong></p> <p>A growing GDP rate usually signals a strong economy and is reflected in the higher price of stocks. However, if the growth is too steep, it can indicate the opposite as, in the long term, it can lead to higher inflation, which tends to have a negative impact on the value of stocks. It is important to note that stocks tend to move just after the release of economic data as they discount the future. This means that major stock indices will move lower when the economy is at its worst as investors and traders position themselves for better times ahead.</p> <p><strong>Exchange rates</strong></p> <p><a href="/en/trading-academy/forex/what-affects-forex-exchange-rates">Foreign exchange rates</a> are usually the product of the previously mentioned factors – a country’s low inflation and GDP growth lead to the strengthening of its currency compared to foreign currencies. Thus, a strong currency as an isolated factor of analysis can also indicate a potential increase in the prices of stocks that originate in the same country.</p> <p><strong>Political events</strong></p> <p>The political climate in the form of either local events, such as presidential elections or geo-political tensions, like armed conflicts and wars, usually has a strong effect not only on stocks of participating countries but on global stock prices too. In the case of elections, it can be both positive and negative, depending on market sentiment. Wars, however, tend to bring distress and falling prices to the stock market.<br /> <br /> All the macroeconomic factors are usually very intertwined and need to be studied as an aggregate – both on the local and global levels. It is also important to keep in mind the economic, political and trading relations of a country where the stock you analyse originates with other countries, as their economies may influence each other. Moreover, it’s always good to keep an eye on the American economy as it usually has a strong global influence, with the US dollar being a globally accepted reserve currency.</p> <h3>Microeconomic factors</h3> <img alt="" src="/getmedia/597c1913-938b-4722-b9f3-8f65d07a17e7/article-what-affects-stock-prices-micro.webp" /> <p><br /> In addition to global drivers, there are also factors on a smaller scale that may affect share prices, such as the company's performance.<br /> <br /> Any positive news, such as higher-than-anticipated reported earnings, new advanced product launches or efficient management restructuring, tends to drive a company's stock up.<br /> <br /> Negative events such as lower-than-expected profits, lawsuits, and any controversy or drops of confidence in company leaders can have the opposite effect and trigger price drops.<br /> <br /> One factor that stands out is the dividend announcement, which usually causes a short-lived price spike caused by dividend hunters. A consequential price drop often follows as a result of a sellout of the shares that were bought with the sole purpose of receiving dividends.<br /> <br /> Microeconomic factors are often reinforced and sometimes even triggered by market sentiment – the way traders perceive the event and the level of investor confidence, which brings us to the last group of factors affecting stock prices.</p> <h3>Human factors</h3> <img alt="" src="/getmedia/70ce09e9-5764-4a22-9ee1-01aa97b52284/article-what-affects-stock-prices-human.webp" /> <p><br /> These are the factors that influence the stock market due to public activity. For example, a new product launch can positively or negatively affect a company's stock price, depending on how traders and investors feel about it. If they believe a product has potential and will gain popularity, it will attract more buyers and traders to the company stock. On the other hand, if they believe it will be a failure, they might start pulling their investments out and sell the stock, causing its price to decline.<br /> <br /> Increased demand for certain products or stocks, leading to their increasing prices, can also be caused solely by public activity. The infamous GameStop saga, for example, at one point brought a whopping 2,000% increase to the company's stock price, followed by an almost equal a large price drop and another surge in just a little over two months. The entire series of events was caused by public activity and sentiment.<br /> <br /> Factors like market sentiment are nearly impossible to predict with a fundamental analysis of a company or economy. That’s where <a href="/en/trading-academy/what-is-technical-analysis-in-trading">technical analysis</a> steps in, but it is usually considered an advanced technique. If you are just starting out your stock trading journey, it is advisable to study the basics first and practice trading on a <a href="/en/demo-account">risk-free demo account</a>. For example, ThinkMarkets’ proprietary platform <a href="/en/platform/download-thinktrader">ThinkTrader</a> offers CFD trading on over 3,000 global stocks and USD 10,000 virtual funds to test and improve your trading skills.</p>
TSMC vs. Samsung part 2: Exploring the rivalry shaping semiconductor manufacturing
<p>Following up on our previous exploration of the intense rivalry between Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics, this article aims to explore the technologies and business practices that make these two companies the giants they are today.</p> <p>In our last discussion, we compared their revenue, technological advancements, and partnerships. Now, we will examine the foundational aspects of their semiconductor manufacturing processes, their competitive strategies, and the broader impacts they have on the world of technology. But before we dive deeper, let’s briefly touch on the importance of semiconductors in general.</p> <h2>What are semiconductors and why are they important?</h2> <p>Semiconductors are materials that have properties between those of a conductor and an insulator, making them ideal for controlling electrical currents. They are the essential building blocks of microchips, which are at the core of virtually every electronic device.</p> <p>Whether it’s your smartphone, laptop, television, or even your car, semiconductors are what enable these devices to function by controlling the flow of electricity and facilitating complex computational tasks.</p> <p>By allowing for precise control over electrical currents, semiconductors are at the heart of the technologies that power our world and are indispensable to both everyday life and the broader technology industry. They enable advancements in computing, telecommunications, automotive systems, healthcare devices, and countless other applications.</p> <h2>The semiconductor manufacturing process</h2> <p>The semiconductor manufacturing process is one of the most intricate and sophisticated production processes in the world. According to ASML and Hitachi High-Tech, the manufacturing of microchips involves several key stages, each critical in transforming raw silicon into the powerful chips that power our devices.</p> <p>The first stage is lithography, where light is used to print intricate patterns on silicon wafers. These patterns form tiny circuits that will eventually process and store data. Lithography is one of the most challenging steps, as it requires incredible precision to print features that are just a few nanometres wide. Companies like ASML are leading in the production of advanced lithography machines, particularly Extreme Ultraviolet (EUV) lithography, which is crucial for producing the latest generations of chips.</p> <p>Next is etching, a process that removes specific areas of the wafer's surface to create the desired circuit patterns. This step is followed by deposition, where various materials are added to the wafer to form the layers of the chip. These layers are essential for creating the transistors and interconnects that enable chips to perform complex calculations.</p> <p>TSMC and Samsung have developed their own unique approaches to these processes, incorporating specialised technologies to enhance chip performance. TSMC, for instance, has pioneered the use of FinFET (Fin Field-Effect Transistor) technology for its 7nm and 5nm nodes, which provides better control of current flow through transistors, reducing power consumption and improving speed. Additionally, TSMC’s Chip-on-Wafer-on-Substrate (CoWoS) packaging technology allows multiple chips to be integrated into a single package, enhancing performance for high-computing applications.</p> <p>Samsung, meanwhile, has focused heavily on advancing Gate-All-Around (GAA) technology with its 3nm nodes. GAA represents a significant leap beyond FinFET by allowing even more precise control of current, which leads to improvements in both power efficiency and performance. Samsung’s implementation of GAA, known as Multi-Bridge-Channel FET (MBCFET), is designed to overcome the limitations of traditional transistor designs as nodes become even smaller.</p> <p>In addition to GAA, Samsung is also a leader in V-NAND and DRAM memory technologies, which are critical for storage and high-speed data processing. V-NAND involves stacking memory cells vertically, which allows for greater storage density and improved performance compared to traditional planar NAND. These innovations have made Samsung a leader in the memory market, complementing its foundry services.</p> <p>The differences between TSMC’s and Samsung’s approaches to semiconductor manufacturing highlight their distinct strategies: TSMC focuses on maintaining a leadership position in logic chip manufacturing through cutting-edge process nodes and advanced packaging, while Samsung leverages its IDM model to integrate memory and logic capabilities, providing a more comprehensive solution for various technology segments.</p> <p>These processes help explain why TSMC and Samsung remain at the forefront of the semiconductor industry. Their constant pursuit of innovation, whether through TSMC’s advanced lithography and packaging or Samsung’s GAA and memory technologies, ensures that the devices we use every day continue to become faster, more efficient, and more capable.</p> <h2>Same industry – different approach</h2> <p>One of the key differences that have prominently emerged in recent years is how TSMC and Samsung respond to global supply chain disruptions.</p> <p>TSMC’s strategy has been to focus on building new fabs outside Taiwan, particularly in countries like the United States and Japan, to address concerns over geopolitical tensions.</p> <p>Samsung, meanwhile, has doubled down on integrating its semiconductor capabilities with its broader consumer electronics and mobile divisions, allowing it to manage disruptions more effectively by relying on an internal supply chain.</p> <p>These evolving strategies are shaping the next chapter in their rivalry, and understanding these moves helps us gain a clearer picture of where the semiconductor industry is headed.</p> <h3>TSMC’s approach</h3> <p>TSMC continues to lead as the largest pure-play foundry, with its primary advantage being its foundry services. What makes TSMC’s approach unique is its aggressive push towards leading-edge nodes, particularly its focus on the 2nm and upcoming 1.4nm processes by 2025.</p> <p>The 2nm and the upcoming 1.4nm semiconductor processes are pivotal advancements that drive significant improvements in device performance, energy efficiency, and innovation. These nano processes enable higher transistor density, allowing chips to deliver faster computing power while consuming less energy, which is key for extending battery life and supporting sustainability goals. They also facilitate more compact designs and the integration of advanced features like AI accelerators, enhanced connectivity, and improved graphics, which makes them essential for next-generation technologies like 5G, AI, and high-performance computing.</p> <p>These advanced nodes provide a competitive edge in the semiconductor industry, positioning companies to meet growing consumer and enterprise demands for powerful and efficient devices. While they require substantial investment and technological precision, their potential to revolutionise technological sectors is unmatched. By enabling cutting-edge innovations, the 2nm and 1.4nm processes set the stage for transformative developments in electronics and computing.</p> <p>TSMC’s commitment to staying ahead in advanced nodes is showcased in its massive investments in research and development which amounted to $6.281B for the twelve months ending 30 September, 2024, noting a 13.65% increase year-over-year, and its ongoing partnerships with leading technology firms to integrate the latest process nodes in consumer products.</p> <h3>Samsung’s approach</h3> <p>Samsung, on the other hand, is leveraging its Integrated Device Manufacturer (IDM) model to strengthen its market position. Unlike TSMC, Samsung designs, manufactures, and markets its own chips, giving it a unique position to optimise the entire production process from start to finish. Samsung's recent advancements in Gate-All-Around (GAA) technology mark a significant step forward in chip design by addressing the limitations of the traditional FinFET architecture.</p> <p>As transistors, the building blocks of chips, become smaller to fit more into each chip, FinFET designs face challenges in controlling the flow of electricity, leading to inefficiencies such as higher power consumption and heat generation. GAA technology overcomes these issues by surrounding the transistor’s channel on all sides, allowing for more precise control of the current. This innovation improves power efficiency, enabling devices to use less energy, while also enhancing performance, making chips faster and more capable.</p> <p>The implications of GAA technology extend beyond just improved efficiency. It enables the creation of high-density chips that are critical for the next generation of technology. By overcoming the physical limitations of older designs, GAA technology ensures that devices can become more powerful and compact without sacrificing energy efficiency. This positions Samsung as a leader in semiconductor innovation, driving advancements that benefit both consumer electronics and industrial applications.</p> <p>Furthermore, Samsung’s growth in the memory chip segment, particularly in V-NAND and DRAM technologies, highlights its ability to diversify its product portfolio and strengthen its position in the semiconductor industry. V-NAND technology, which stacks memory cells vertically, allows for higher storage capacity and faster performance in a smaller space, making it ideal for modern devices like smartphones, SSDs, and data centres. Similarly, DRAM technology, which provides fast, temporary data storage for active applications, remains essential to everything related. By advancing in these areas, Samsung ensures it can meet the rising demand for high-performance memory solutions.</p> <p>This diversification provides stability against market fluctuations, as demand for memory chips often remains steady even when other segments experience downturns. By investing in innovative memory technologies, Samsung not only solidifies its competitive edge but also ensures it can adapt to evolving market needs. Through this strategy, the company positions itself as a reliable leader in memory solutions while contributing to the development of more efficient and powerful devices worldwide.</p> <h3>The role of major partnerships and clients</h3> <p>The partnerships and collaborations of TSMC and Samsung have played a significant role in their growth and leadership in the semiconductor market.</p> <p>TSMC has established strong relationships with leading technology firms such as Apple, AMD, and Nvidia. These partnerships are essential for TSMC as they ensure a steady demand for advanced nodes and position TSMC as the preferred supplier for some of the world's most innovative companies. For example, Apple relies on TSMC's cutting-edge technologies for its A-series and M-series chips, which power iPhones, iPads, and MacBooks. Similarly, AMD and Nvidia depend on TSMC’s advanced nodes for their high-performance processors and graphics cards.</p> <p>Samsung has also forged significant collaborations, notably with Qualcomm and IBM. Qualcomm, a leader in mobile processors, has partnered with Samsung to manufacture its Snapdragon chips using Samsung’s 4nm and 3nm nodes. This collaboration highlights Samsung’s capability in producing high-performance mobile processors. Additionally, Samsung's partnership with IBM aims to push the boundaries of semiconductor innovation, with a focus on developing next-generation logic and memory technologies.</p> <p>These partnerships profoundly affect the technological development and market positioning of TSMC and Samsung.</p> <h2>Global impact of TSMC and Samsung</h2> <p>The global impact of TSMC and Samsung extends beyond their technological advancements; they are key players in the international semiconductor supply chain.</p> <p>TSMC and Samsung are two of the largest semiconductor manufacturers globally, and their production capabilities influence the availability of advanced chips for a wide range of industries, including consumer electronics, automotive, and telecommunications.</p> <p>The significance of their roles became especially evident during the recent global chip shortage, which affected industries worldwide. Geopolitically, both companies are also at the centre of international trade and technology security. The reliance of major economies on TSMC and Samsung for advanced semiconductors has made these companies strategic assets, with countries like the United States, Japan, and South Korea actively supporting their expansion efforts.</p> <p>TSMC’s decision to build fabs in the US and Japan, and Samsung’s investment in new facilities in Texas, are moves that reflect the geopolitical importance of securing a stable and resilient semiconductor supply chain. FlowCh.ai highlights how TSMC and Samsung are positioning themselves globally to mitigate risks and take advantage of opportunities. By diversifying their manufacturing locations, both companies aim to reduce the impact of regional disruptions and ensure a continuous supply of advanced chips to their clients worldwide.</p> <h2>Challenges facing TSMC and Samsung</h2> <p>Despite their successes, TSMC and Samsung face several challenges that could impact their future growth and market positions. One of the significant challenges is the global chip shortage, which has put immense pressure on semiconductor manufacturers to increase capacity.</p> <p>As we have already examined, both companies are investing heavily in expanding their production capabilities, but the high costs and long timelines associated with building new fabs make it a complex issue to address. Geopolitical tensions also pose a considerable risk. TSMC's heavy reliance on Taiwanese facilities makes it vulnerable to geopolitical instability in the region.</p> <p>Similarly, Samsung is expanding its footprint in the US to reduce its reliance on South Korean facilities. According to Investopedia, Samsung's recent $7.2 billion buyback plan is part of its strategy to navigate financial challenges and reassure investors of its stability amidst market uncertainties.</p> <p>The semiconductor industry is capital-intensive, and maintaining investor confidence is crucial for funding the R&D and expansion projects needed to stay competitive. Supply chain disruptions, rising production costs, and the need for advanced equipment are additional challenges that both companies must address.</p> <p>As they strive to develop smaller, more efficient nodes, the cost of R&D and production continues to rise, requiring significant financial resources and technological expertise.</p> <h2>The future of semiconductor technology</h2> <p>The future of the semiconductor industry will be defined by continued innovation, strategic investments, and the ability to overcome challenges posed by geopolitical and market dynamics. TSMC and Samsung are setting the stage for the next wave of technological advancements.</p> <p>Emerging technologies like quantum computing, neuromorphic computing, and silicon photonics are also reshaping the future of the semiconductor landscape. Both TSMC and Samsung are exploring these frontiers through collaborations with academic institutions and technology firms, investing in the research and development required to bring these technologies to market.</p> <p>From a broader perspective, sustainability is becoming increasingly important. The environmental impact of semiconductor manufacturing is significant, and both companies are focusing on improving energy efficiency and reducing waste. TSMC has set ambitious targets to achieve net-zero emissions by 2050, while Samsung is implementing eco-friendly practices in its fabs to minimise its carbon footprint.</p> <p>The semiconductor industry’s future will also depend on addressing workforce challenges, including the need for skilled engineers and technicians. Both TSMC and Samsung are ramping up training programmes and collaborating with educational institutions to develop the next generation of talent.</p> <h2>Semiconductor innovation driven by competition</h2> <p>The rivalry between TSMC and Samsung is a driving force behind the innovation and progress of the semiconductor industry. Their competitive strategies, technological advancements, and global influence ensure that they remain at the forefront of shaping the future of technology.</p> <p>As the demand for advanced semiconductors continues to grow, TSMC and Samsung are well-positioned to lead the industry into a new era of technological possibilities. Their ongoing competition fuels advancements that benefit not just their clients but the entire ecosystem of industries that rely on semiconductors.</p> <p>The future of the TSMC vs. Samsung rivalry promises to be as dynamic and transformative as the technologies they produce, making it an essential narrative for anyone interested in the evolution of modern technology.</p>