TSMC. The most powerful company in the world
Welcome to Capital Note, a newsletter on business, finance and economics. In the menu today. Lack of chips has boosted bets on Taiwan, US GDP is growing, and Verizon is throwing in the towel on digital media. Follow this link to sign up for Capital Note. Semiconductor Deficiency Can Save Taiwan Founded in 1987 by Chinese Maurice Chang, Taiwan Semiconductor Manufacturing Company (TSMC) was the first “clean game” foundry to manufacture integrated circuits designed by other companies. Chip designers used to make their products at home, but the founding of TSMC transformed the semiconductor industry, dividing the market into “mythical” design firms with no in-house production facilities, and pure game foundries that only produce integral device manufacturers. Three decades later, TSMC is far from being one of the world’s leading semiconductor manufacturers. Now, with a global chip shortage, TSMC is arguably the most powerful company in the world. Late last year, automakers began warning that insufficient supply of chips was hampering car production. The shortage soon hit manufacturers of everything from industrial vehicles to cell phones. The sharp decline was evident yesterday when Apple, which accounts for one-fifth of TSMC’s revenue, told investors that sales of Macs and iPads would fall by about $ 3 billion due to supply constraints. If the world’s most valuable smartphone company fails to fulfill its orders, no one will be harmed. The waiting time for semiconductor orders, usually four to eight weeks, has been extended to 52 weeks, and neither executives nor policymakers can force restrictions on brute force, as it takes years for new product sites to go online. Intel recently announced plans to build two new plants in Arizona, but they will not be operational until 2024. And the $ 50 billion allocated to Biden’s semiconductor infrastructure project is unlikely to move the needle, given that the United States has only a 10 percent market share. share in the production of chips. While supply shortages will eventually ease, if past semiconductor cycles, if any, are likely to lead to supply shortages, the episode underscores the strategic importance of chip production capabilities. TSMC and Samsung alone control about 75 percent of the foundry market, providing a wide range of large, low-tech products. This means that most of the world economy depends on only two suppliers who are not easily interchangeable. Businesses may want to diversify their suppliers, but the amount of knowledge and capital needed to compete with the dominant chip makers is staggering. The Chinese government has invested hundreds of billions in its domestic foundries in vain, և US integrated device manufacturers have been steadily eroding their market share for the past three decades. At the same time, Beijing and Washington are working hard on the fate of Taiwan, which China claims as its territory. For the past year, Beijing has been flexing its muscles in the Taiwan Strait, with military planes reportedly flying around the island in March, just days after Biden was sworn in. The Trump administration has deepened ties with the island, but the United States still pursues a policy of “strategic ambiguity” toward the island, offering support but refusing to fully recognize its independence. If American alliances in the Middle East tell us anything, it is that Washington will spare no effort to protect foreign economic assets. Although the war over Taiwan was largely ideological, the lack of a chip added a new dimension. If Beijing invades, it could shift the scales of US intervention. Web Growth US Web Growth Grows 6.4% in the First Quarter US economic growth in the first three months of 2021 was driven by large financial stimulus to consumer spending, as well as looser blocking restrictions, pushing production to pre-epidemic levels. Gross domestic product rose 6.4 percent year on year in the first quarter, the Commerce Department said Thursday. According to a survey by Refinitiv, it exceeded economists’ expectations for 6.1% growth, the fastest growth in the first quarter since 1984. The chip deficit is getting worse in the dizzying 12-hour stretch, Honda Motor Co. said it will stop production. three factories in three aponia; BMW AG has cut shifts in factories in Germany և England; Motor Ford Motor Co. downgraded its full-year profit forecast to next year due to a lack of chips. Caterpillar Inc. later flagged that it might not be able to meet the demand for machinery used by the construction and mining industries. Now it’s the companies that have benefited from the huge demand for phones, laptops and electronics during the epidemic, which has led to a sense of chip chip shortage. After the second quarter, Apple Chief Financial Officer Luca Maestri warned of supply constraints that are squeezing sales of iPads and Macs, two products that worked particularly well during the blockchain. The maestro says this will generate $ 3 billion to $ 4 billion in revenue in the third quarter. Yahoo! after buying big tickets. Verizon Communications Inc. is investigating asset sales, including Yahoo և AOL, as the telecommunications giant wants to get out of the expensive և unsuccessful digital media bet. The sale process, which involves private equity firm Apollo Global Management Inc., could lead to a $ 4 billion to $ 5 billion deal, acquaintances say, assuming there is one. No other details were available. Verizon poured billions of dollars into a portfolio of once-dominant sites, including AOL in 2015 and Yahoo in 2017, paying a total of more than $ 9 billion to acquire the pair. Random step The Financial Times last month well analyzed TSMC, explaining how it combined scale ման processing knowledge to build a massive competitive trench. [TSMC] becomes more prevalent in the technological node of each new process. Although it accounts for only 40 to 65 percent of the 28-65 nm revenue, the nodes used to make most of the car chips, it accounts for almost 90 percent of the market. currently the leading nodes in production. “Yes, the industry is incredibly dependent on TSMC, especially when you go out on a bleeding edge, it’s pretty risky,” says Peter Hanber, a partner at Bain & Company in San Francisco. “Twenty years ago there were 20 foundries, now the most modern items are sitting on a campus in Taiwan.” As each new process technology node requires more sophisticated development և greater investment in new production capacity, other chipmakers began to focus on design for years թող leaving production to special foundries such as TSMC. As the cost of new counterfeits increased, so did many other chipmakers, և TSMC’s competitors in the pure game casting market dropped out of the race. One solution would be to diversify your supply chain by distributing TSMC fabrics worldwide. That was the rationale for the Trump administration’s successful bid to open TSMC plants in Arizona, but it is not the perfect solution. According to analysts, one of the main reasons why the company is so effective and profitable is the concentration of production in Taiwan. “TSMC’s major sites in Taiwan are close enough for TSMC to flexibly mobilize our engineers to assist each other when needed,” said TSMC spokeswoman Nina Kao. A person close to the company estimates that production costs in the United States are 8-10% higher than in Taiwan. Consequently, TSMC is not ready to expand its manufacturing operations worldwide. “In the United States, we pledged to build a plant after the authorities realized they would subsidize the cost gap. “Our investment in Japan is focused on a technology area that is potential for our future,” said TSMC Senior Executive Officer. “But in Europe the situation is not so strong.” [the Europeans] They really need to find out what exactly they want, can they achieve it through their own chipmakers? ” – To subscribe to DT Capital Note, follow this link.