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Samsung Electronics and TSMC's market caps

Samsung Electronics’ market capitalization was surpassed for the first time in 17 years by Taiwan’s TSMC. Experts attributed the development to differences in market conditions for memory and non-memory semiconductors.

On Nov. 27, TSMC recorded a market cap of US$279.1 billion on the New York Stock Exchange, putting it ahead of Samsung Electronics’ US$264.7 billion.

“The market caps have switched places since Nov. 20, which is the first time that’s happened since 2002,” said Noh Dong-gil, an analyst at NH Investment and Securities.

TSMC’s share prices have risen by 46% this year, reaching a record high and surpassing Samsung Electronics’ growth rate of 35%. Some observers argue that Samsung Electronics still has the higher market cap when preferred shares (US$29.5 billion) are factored in. But while shares of a different nature, such as voting rights and dividends, add to market capitalization -- as with Google or Berkshire Hathaway -- preferred shares are typically left out.

Industry observers attributed the market cap reversal as reflecting global investors’ preference for non-memory shares, where demand has been rising faster than for memory. Benefiting from the rise in non-memory demand as the top-ranked foundry business, TMSC is recording the highest sales since its foundation. US-China trade frictions have also worked in Taiwan’s favor as global businesses have relocated their production bases to Taiwan amid high tariffs on IT products in China. The current situation has been a boon for TSMC, which produces semiconductors by commission.

Share prices for the two companies, which are considered pre-eminent businesses in South Korea and Taiwan respectively, have also influenced the price index. As it happens, the two companies have nearly identical market cap percentages of around 23% on South Korea’s KOSPI index and the Taiwan Capitalization Weighted Stock Index -- one of the reasons the Taiwanese stock market has been relatively robust.

Experts predicted the situation will reverse itself next year as the trade frictions ease up and the memory situation improves, drawing more focus back to Samsung Electronics. Indeed, Samsung Electronics holds an overwhelming lead in terms of overall performance, including memory. Its sales this year are predicted to be 5.6 times greater than TSMC, with operating profits 1.9 times higher.

“On the US stock market, Micron, which focuses on memory, has already been showing more stock price growth momentum than Intel,” noted Kim Young-hwan, a KB Securities analyst.

By Han Gwang-deok, finance correspondent

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