Samsung Electronics’ chip division is likely to be dethroned by TSMC, the world's largest foundry company that manufactures Nvidia chips, in terms of the latest quarterly sales, according to industry sources on Sunday.

Samsung’s third-quarter sales are estimated to reach a record high of 79 trillion won ($57.7 billion), up 17.2 percent from a year ago. Although the Korean tech giant has not released detailed reports on the performance of its key business units for the quarter earnings guidance, market watchers expect its Device Solutions division, which oversees the chip business, to earn 28.56 trillion won in revenue, similar to the previous quarter.

On Thursday, TSMC announced that its third-quarter revenue increased 39 percent year over year to reach $759.69 billion Taiwanese dollars ($23.50 billion), marking its highest quarterly performance. If the confirmed results for Samsung’s third quarter, due at the end of this month, show DS division revenue at the market forecast level, it will fall short of TSMC’s revenue.

In the April-June period, Samsung’s DS division achieved significant performance improvement, thanks to the recovery of memory demand and rising prices. Consequently, it narrowly surpassed TSMC's revenue of $673.51 billion Taiwanese dollars for the quarter. This marked two years since Samsung allowed TSMC to overtake it in revenue, starting from the third quarter of 2022.

However, as the recovery in demand has been slower than expected and the momentum of performance improvement has stalled, there is a growing possibility that Samsung will allow TSMC to regain the lead just one quarter after surpassing it in revenue, sources predicted.

In the overlapping foundry sector, TSMC also shows overwhelming superiority, holding a market share of 62.3 percent compared to Samsung's 11.5 percent in the second quarter.

The AI boom has driven TSMC's stellar performance, as it effectively monopolizes the production of Nvidia's cutting-edge AI chips. In contrast, as chip demand shifts towards AI, while the existing IT demand slump continues, Samsung has struggled to stand out in the AI sector.

Samsung’s continuous deficits are a result of poor order intakes, low utilization rates and one-off costs in the foundry sector. It is estimated that Samsung's non-memory division, including foundry and system LSI, incurred a deficit of over 1 trillion won in the third quarter.

Despite massive investments, the results have been disappointing, widening the gap with TSMC.

According to Eugene Investment & Securities, Samsung's non-memory division revenue in 2011 was 14.2 trillion won, about 88 percent of TSMC's revenue of $14.5 billion. In 2023, however, TSMC's revenue reached $70.2 billion, while Samsung's non-memory revenue shrank to 22.2 trillion won, only 25 percent of TSMC's figure.

“Samsung has yet to produce the desired results in high-bandwidth memory, and while it was expected to return to profitability in the second half, the foundry sector remains trapped in a deficit with no signs of recovery,” said Lee Seung-woo, an analyst at Eugene Investment & Securities.