The Economist has an article on the rise and rise of TSMC as "the Hope Diamond of the semiconductor industry" or perhaps the most strategically important company in the world.
This is as much a story of the precipitous fall of Intel in slightly more than a decade, as it is of the spectacular rise of TSMC.
In a world of declining investments, TSMC's investment appetite is massive,
In January it said it would raise its capital expenditure for 2021 to $25bn-28bn, up from $17bn in 2020. In April it raised the figure again, to $30bn. It plans to spend $100bn over the next three years. Fully 80% of this year’s spending will go on advanced technologies.
And this about its profitability,
Last year TSMC made an operating profit of $20bn on revenues of $48bn... It has also stopped cutting prices—which in chipmaking, where processing power has only ever got cheaper, is tantamount to raising them... IC Insights, a research firm, calculates that TSMC can charge between twice and three times as much per silicon wafer when selling its most advanced processes, compared with what the next-most-advanced technology will fetch. This creates a positive feedback loop. Developing the latest technology before anyone else allows TSMC to charge higher prices and earn more profit, which is ploughed back into the next generation of technology to continue the cycle. And the cycle is spinning ever faster. Four technological generations ago it took TSMC two years for those cutting-edge chips to make up 20% of revenues; the latest generation needed just six months to reach the same level (see chart 2). Operating income, which grew at an average rate of 8% year in the decade to 2012, has since risen at an average rate of 15%. Combined with revenues that chip-designers make from semiconductors ultimately forged by TSMC, the company and its customers account for 39% of the global market for microprocessors, according to VLSIresearch, up from 9% in 2000 and a third more than once-dominant Intel.
As the example of Intel shows, TSMC's fortunes can turn quickly. Besides, its biggest threat is what can happen across the Straits with China. And Taiwan's risk mitigation strategy makes TSMC even more vulnerable,
Taiwanese government encourages all its chipmakers, including TSMC, to keep their cutting-edge production on the island as a form of protection from foreign meddling... Reflecting this, 97% of TSMC’s $57bn-worth of long-term assets reside in Taiwan (see chart 3). That includes every one of its most advanced fabs. Some 90% of its 56,800 staff, of whom half have doctorates or masters degrees, are based in Taiwan. The firm has made soothing noises to both America and China and offered to invest more in production lines based in the two superpowers. But it is hard not to see this as diplomatic theatre. Its Chinese factory in Nanjing, opened in 2018, produces chips that are two or three generations behind the cutting edge. By the time its first American fab, designed to be more advanced than the one in Nanjing, is up and running in 2024, TSMC will be churning out even fancier circuits at home. By our estimates, based on disclosed investment plans, the net value of TSMC’s fabs and associated equipment will roughly double by 2025 but 86% will still be located in Taiwan.
This is another excellent read in FT about TSMC and its dominance of the cutting-edge of chip making.
Nice Bloomberg story on why it's very hard to make semiconductor chips.
It takes years to build semiconductor fabrication facilities and billions of dollars—and even then the economics are so brutal that you can lose out if your manufacturing expertise is a fraction behind the competition... Manufacturing a chip typically takes more than three months and involves giant factories, dust-free rooms, multi-million-dollar machines, molten tin and lasers. The end goal is to transform wafers of silicon—an element extracted from plain sand—into a network of billions of tiny switches called transistors that form the basis of the circuitry that will eventually give a phone, computer, car, washing machine or satellite crucial capabilities. Most chips are groups of circuits that run software, manipulate data and control the functions of electronic devices.
Good primer on the global chip industry by Prosenjit Datta.
No comments:
Post a Comment