Good news for the global semiconductor business today highlights the central role of a Taiwan manufacturer in the saga that’s been unfolding over the past few years.
Sam Ro at Axios reports the CEO of Taiwan semiconductor manufacturing firm TSMC projects production will be up a full 60% in 2021 from the prior year.
“By taking such actions, we expect the automotive component shortage from semiconductors to be greatly reduced for TSMC customers starting this quarter,” said C.C. Wei, according to Ro’s reporting.
Ro also chronicles the emergence of TSMC as a company producing over half of all chip production globally, and its early development as a ‘pure play’ foundry manufacturer getting ‘fabless’ clients (firms without their own fabrication divisions) to outsource the building of their semiconductor designs.
Calling TSMC the “most important company in the world,” Ro writes about a deliberate strategy to become central to a tech sector with a lot of relevance to new consumer products.
Then the shortage hit.
“Late last year, automakers began warning that insufficient chip supply was constraining car production,” writes Daniel Tenreiro at Capital Matters. “The shortage soon hit producers of everything from industrial machinery to mobile phones. Yesterday, the severity of the shortage was put on stark display when Apple, which accounts for one-fifth of TSMC’s revenue, told investors that sales of Macs and iPads would fall by some $3 billion because of supply constraints. If the world’s most valuable smartphone company can’t get its orders filled, no one will come out unscathed. Wait times for semiconductor orders, typically between four and eight weeks, have stretched as long as 52 weeks, and neither CEOs nor policy-makers can address the constraints through brute force, because new production sites take years to come online. Intel recently announced plans to build two new fabs in Arizona, but those won’t be operational until 2024. And the $50 billion allocated to semiconductor manufacturing in Biden’s infrastructure bill is unlikely to move the needle, considering that the U.S. has only 10 percent market share in chip production.”
In this context, TSMC’s centrality also feeds into geopolitical tensions between the U.S. and China.
“While the strategic and military importance of Taiwan in any conflict between the US and China is evident, not so obvious is the crucial role that the relatively small country of just 24 million people plays in the global economy through the manufacture of semiconductor chips,” writes Peter Symond at WSWC.org. “The mass production of computer chips is essential to everything from smart phones, laptops and vehicles to cutting-edge applications, such as artificial intelligence, supercomputers and quantum computing, that augur what some have termed the ‘fourth industrial revolution.’”
Any tech investor should keep up with what’s happening in chips. Maybe the new TSMC production levels will take pressure off – but then, the issues around the above geopolitical tension are no small potatoes.