- NVIDIA GeForce RTX 50 series to feature DisplayPort 2.1, using TSMC 3nm node VideoCardz.com
- NVIDIA GeForce RTX 50 “Blackwell” GPUs Utilize TSMC 3nm Process, DisplayPort 2.1 Support Wccftech
- GeForce RTX 5090’s 512-Bit Bus Rumor Busted? Here’s The Latest On Next-Gen GPU’s VRAM Hot Hardware
- Nvidia GeForce RTX 50 Blackwell GPUs rumored to come with TSMC 3nm and DisplayPort 2.1 — AMD already offers the standard on the current Radeon RX 7000 series Tom’s Hardware
- NVIDIA RTX 5090 Specs: 26,112 Cores, GDDR7 Memory, and 1,536 GB/s of Bandwidth Hardware Times
- View Full Coverage on Google News
Tag Archives: TSMC
Warren Buffett says the unusually quick sale of Berkshire Hathaway’s TSMC stake was driven by geopolitical tensions – Yahoo Finance
- Warren Buffett says the unusually quick sale of Berkshire Hathaway’s TSMC stake was driven by geopolitical tensions Yahoo Finance
- Buffett’s Japanese stock purchases could indicate a bigger plan, says Mobius Capital’s Mark Mobius CNBC Television
- Berkshire Set to Pay More for Yen Debt Amid BOJ Tightening Bets Bloomberg
- Warren Buffett has his eyes on this one country when it comes to his future investments—and he already owns 6% of its top 5 companies Yahoo Finance
- Cramer’s First Take: Warren Buffett doesn’t invest like us CNBC Television
- View Full Coverage on Google News
As the world courts TSMC, Taiwan worries about losing its ‘silicon shield’
Hong Kong
CNN
—
Semiconductor giant TSMC was feted this week by US President Joe Biden and Apple CEO Tim Cook during a ceremony to unveil its $40 billion manufacturing site in Arizona — a huge investment designed to help secure America’s supply of the most advanced chips.
But back home in Taiwan, there is deep unease over the growing political and commercial pressure being applied to the world’s most important chipmaker to expand internationally. The company is building a facility in Japan and considering investing in Europe.
“They’re like the Hope Diamond of semiconductors. Everybody wants them,” said G. Dan Hutcheson, vice chair of TechInsights, a research organization specializing in chips. (The Hope Diamond is the world’s largest blue diamond, which now resides at the Smithsonian Institute’s National Museum of Natural History in Washington.)
“Customers in China want them to build there. Customers in the US want them there. And customers in Europe want them there too,” he added.
Apart from the risk that TSMC will take its most advanced technology with it — stripping Taiwan of one of its unique assets and reducing employment opportunities locally — there are fears that a diminished presence for the company could expose Taipei to greater pressure from Beijing, which has vowed to take control of the self-ruled island, by force if necessary.
TSMC is considered a national treasure in Taiwan and supplies tech giants including Apple
(AAPL) and Qualcomm
(QCOM). It mass produces the most advanced semiconductors in the world, components that are vital to the smooth running of everything from smartphones to washing machines.
The company is perceived as being so valuable to the global economy, as well as to China — which claims Taiwan as its own territory despite having never controlled it — that it is sometimes even referred to as forming part of a “silicon shield” against a potential military invasion by Beijing. TSMC’s presence gives a strong incentive to the West to defend Taiwan against any attempt by China to take it by force.
“The idea is that if Taiwan became a powerhouse in semiconductors, then America would have to support and defend it,” said Hutcheson. “The strategy has been super successful.”
A day before Tuesday’s Phoenix ceremony Chiu Chenyuan, a lawmaker with the opposition Taiwan People’s Party, grilled Foreign Minister Joseph Wu about whether there is a “secret deal” with the United States to disadvantage Taiwan’s chip industry.
Chiu claimed that the chip giant was under political pressure to move its operations and its most advanced technology to the US. He cited the transfer of 300 people, including TSMC engineers, to the Arizona plant. In response, Wu said there was no secret deal, nor was there any attempt to diminish the importance of Taiwan to TSMC.
Patrick Chen, the Taipei-based head of research at CL Securities Taiwan, said there was a common concern on the island about TSMC’s growing international importance, the pressure it is facing to expand, and what that means for Taiwan.
“It is similar to what happened in the US in the 70s and 80s when manufacturing jobs were being shifted away from the States into other countries. Many local jobs were lost and cities bankrupted,” he said.
CNN has asked TSMC for comment about its expansion plans.
Its CEO, CC Wei, had previously said: “Every region is important to TSMC,” adding that it would “continue to serve all the customers all over the world.”
Founded in 1987 by Morris Chang, TSMC is not a household name outside Taiwan, even though it produces an estimated 90% of the world’s super-advanced computer chips.
Semiconductors are an indispensable part of just about every electronic device. They are difficult to make because of the high cost of development and the level of knowledge required, meaning much of the production is concentrated among a handful of suppliers.
Concerned about losing access to crucial chips, particularly as tension has escalated between China and the United States, as well as between Beijing and Taipei, governments and major consumer-facing companies like Apple have asked semiconductor companies to localize their operations, according to experts.
“TSMC’s decision to expand its Arizona investment is evidence that politics and geopolitical risks will play a bigger role than previously in supply chain decisions,” said Chris Miller, author of “Chip War: the Fight for the World’s Most Critical Technology”.
“It also suggests that TSMC’s customers are asking for more geographic diversification, which is something that wasn’t previously a key concern of major customers.”
On Tuesday, TSMC said it was increasing its investment in the US by building a second semiconductor factory in Arizona and raising its total investment there from $12 billion to $40 billion.
Chang had previously said its plant in Arizona would produce 3-nanometer chips, the company’s most advanced technology, as advances in chip manufacturing require etching ever-smaller transistors onto silicon wafers.
These announcements alarm politicians like Chiu of the Taiwan People’s Party’s. He frets about the island losing out as TSMC is courted globally.
Chen of CL Securities said national security concerns among governments globally are driving TSMC’s expansion. But he believes the company will continue to manufacture its most advanced technology at home.
“This would make economic sense given [the] lower salaries [and] higher quality of Taiwanese engineers,” he said, adding that the company needs the approval of the Taiwan Ministry of Economic Affairs to move its most advanced technologies abroad, which it was unlikely to give.
Many experts believe that by the time 3-nanometer chips are being made in Arizona, TSMC’s Taiwan operations would be producing even smaller, more advanced chips.
Hutcheson also believes TSMC will keep its most cutting-edge development teams in Taiwan.
“Once you have a team of people doing development work, they work very closely together. You don’t want to disrupt that. It’s not an easy thing to do,” he said.
— CNN’s Wayne Chang contributed to this report.
As the world courts TSMC, Taiwan worries about losing its ‘silicon shield’
Hong Kong
CNN
—
Semiconductor giant TSMC was feted this week by US President Joe Biden and Apple CEO Tim Cook during a ceremony to unveil its $40 billion manufacturing site in Arizona — a huge investment designed to help secure America’s supply of the most advanced chips.
But back home in Taiwan, there is deep unease over the growing political and commercial pressure being applied to the world’s most important chipmaker to expand internationally. The company is building a facility in Japan and considering investing in Europe.
“They’re like the Hope Diamond of semiconductors. Everybody wants them,” said G. Dan Hutcheson, vice chair of TechInsights, a research organization specializing in chips. (The Hope Diamond is the world’s largest blue diamond, which now resides at the Smithsonian Institute’s National Museum of Natural History in Washington.)
“Customers in China want them to build there. Customers in the US want them there. And customers in Europe want them there too,” he added.
Apart from the risk that TSMC will take its most advanced technology with it — stripping Taiwan of one of its unique assets and reducing employment opportunities locally — there are fears that a diminished presence for the company could expose Taipei to greater pressure from Beijing, which has vowed to take control of the self-ruled island, by force if necessary.
TSMC is considered a national treasure in Taiwan and supplies tech giants including Apple
(AAPL) and Qualcomm
(QCOM). It mass produces the most advanced semiconductors in the world, components that are vital to the smooth running of everything from smartphones to washing machines.
The company is perceived as being so valuable to the global economy, as well as to China — which claims Taiwan as its own territory despite having never controlled it — that it is sometimes even referred to as forming part of a “silicon shield” against a potential military invasion by Beijing. TSMC’s presence gives a strong incentive to the West to defend Taiwan against any attempt by China to take it by force.
“The idea is that if Taiwan became a powerhouse in semiconductors, then America would have to support and defend it,” said Hutcheson. “The strategy has been super successful.”
A day before Tuesday’s Phoenix ceremony Chiu Chenyuan, a lawmaker with the opposition Taiwan People’s Party, grilled Foreign Minister Joseph Wu about whether there is a “secret deal” with the United States to disadvantage Taiwan’s chip industry.
Chiu claimed that the chip giant was under political pressure to move its operations and its most advanced technology to the US. He cited the transfer of 300 people, including TSMC engineers, to the Arizona plant. In response, Wu said there was no secret deal, nor was there any attempt to diminish the importance of Taiwan to TSMC.
Patrick Chen, the Taipei-based head of research at CL Securities Taiwan, said there was a common concern on the island about TSMC’s growing international importance, the pressure it is facing to expand, and what that means for Taiwan.
“It is similar to what happened in the US in the 70s and 80s when manufacturing jobs were being shifted away from the States into other countries. Many local jobs were lost and cities bankrupted,” he said.
CNN has asked TSMC for comment about its expansion plans.
Its CEO, CC Wei, had previously said: “Every region is important to TSMC,” adding that it would “continue to serve all the customers all over the world.”
Founded in 1987 by Morris Chang, TSMC is not a household name outside Taiwan, even though it produces an estimated 90% of the world’s super-advanced computer chips.
Semiconductors are an indispensable part of just about every electronic device. They are difficult to make because of the high cost of development and the level of knowledge required, meaning much of the production is concentrated among a handful of suppliers.
Concerned about losing access to crucial chips, particularly as tension has escalated between China and the United States, as well as between Beijing and Taipei, governments and major consumer-facing companies like Apple have asked semiconductor companies to localize their operations, according to experts.
“TSMC’s decision to expand its Arizona investment is evidence that politics and geopolitical risks will play a bigger role than previously in supply chain decisions,” said Chris Miller, author of “Chip War: the Fight for the World’s Most Critical Technology”.
“It also suggests that TSMC’s customers are asking for more geographic diversification, which is something that wasn’t previously a key concern of major customers.”
On Tuesday, TSMC said it was increasing its investment in the US by building a second semiconductor factory in Arizona and raising its total investment there from $12 billion to $40 billion.
Chang had previously said its plant in Arizona would produce 3-nanometer chips, the company’s most advanced technology, as advances in chip manufacturing require etching ever-smaller transistors onto silicon wafers.
These announcements alarm politicians like Chiu of the Taiwan People’s Party’s. He frets about the island losing out as TSMC is courted globally.
Chen of CL Securities said national security concerns among governments globally are driving TSMC’s expansion. But he believes the company will continue to manufacture its most advanced technology at home.
“This would make economic sense given [the] lower salaries [and] higher quality of Taiwanese engineers,” he said, adding that the company needs the approval of the Taiwan Ministry of Economic Affairs to move its most advanced technologies abroad, which it was unlikely to give.
Many experts believe that by the time 3-nanometer chips are being made in Arizona, TSMC’s Taiwan operations would be producing even smaller, more advanced chips.
Hutcheson also believes TSMC will keep its most cutting-edge development teams in Taiwan.
“Once you have a team of people doing development work, they work very closely together. You don’t want to disrupt that. It’s not an easy thing to do,” he said.
— CNN’s Wayne Chang contributed to this report.
Tesla reportedly places massive order of next-gen self-driving chips with TSMC
Tesla has reportedly placed a massive order of chips for its next-gen Full Self-Driving (FSD) computer with Taiwan’s TSMC. The order is so large that it might make Tesla one of TSMC’s biggest customers.
Back in 2016, Tesla started building a team of chip architects led by legendary chip designer Jim Keller to develop its own silicon.
The goal was to design a super powerful and efficient chip to achieve self-driving in consumer vehicles without additional hardware like in custom-built autonomous vehicles operated by Waymo and Cruise.
In 2019, Tesla finally unveiled the chip as part of its Hardware 3.0 (HW 3.0) self-driving computer.
They claim a factor of 21 improvements in frame-per-second processing versus the previous-generation Tesla Autopilot hardware, which was powered by Nvidia hardware, while only barely increasing the power consumption.
When launching the new chip, CEO Elon Musk announced that Tesla is already working on the next generation of the chip, and they expect it to be three times better than the new chip and roughly two years from production.
While it has been more than two years and the chip hasn’t come, there have been increasing rumors about Tesla working on bringing the chip to production.
For the first generation of its self-driving chip, Tesla had been working with Samsung to produce the device.
In 2020, it was rumored that Tesla was working with TSMC on the next generation.
TSMC, or Taiwan Semiconductor Manufacturing Company Limited, is one of the world’s largest semiconductor companies.
Now Tesla is reportedly moving forward with TSMC and has started placing large orders for its next-gen self-driving chip, according to reports coming out of China and Taiwan (translated from Chinese):
TSMC is receiving orders for vehicles, and it is reported that it has replaced Samsung and won a large order for Tesla’s new generation of fully automatic driver assistance (FSD) chips, which will be produced at 4/5 nanometers. Tesla is expected to become one of TSMC’s top seven customers next year. It is the first time that TSMC’s main customer has a pure electric car factory, which will help resist the impact of consumer electronics boom adjustments.
According to the report, TSMC plans to supply Tesla’s production from a factory in Arizona.
Not much is known about Tesla’s next FSD computer, but the automaker said that it is not required to achieve Full Self-Driving – though it would improve performance.
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Buffett’s Berkshire discloses $4.1 bln TSMC stake
Nov 14 (Reuters) – Berkshire Hathaway Inc (BRKa.N) said it bought more than $4.1 billion of stock in Taiwan Semiconductor Manufacturing (2330.TW), , a rare significant foray into the technology sector by billionaire Warren Buffett’s conglomerate.
The news sent shares in TSMC up more than 6% in Taiwan on Tuesday, as it boosted investor sentiment for the world’s largest contract chipmaker, which saw its shares hit a two-year low last month due to a sharp slowdown in global chip demand.
In a Monday regulatory filing describing its U.S.-listed equity investments as of Sept. 30, Berkshire said it owned about 60.1 million American depositary shares of TSMC.
Berkshire also disclosed new stakes of $297 million in building materials company Louisiana-Pacific Corp (LPX.N) and $13 million in Jefferies Financial Group Inc (JEF.N). It exited an investment in Store Capital Corp (STOR.N), a real estate company that agreed in September to be taken private.
The filing did not specify whether Buffett or his portfolio managers Todd Combs and Ted Weschler made specific purchases and sales. Investors often try to piggy back on what Berkshire buys. Larger investments are normally Buffett’s.
While Berkshire does not normally make big technology bets, it often prefers companies it perceives to have competitive advantages, often through their size.
TSMC, which makes chips for the likes of Apple Inc (AAPL.O), Qulacomm (QCOM.O) and Nvidia Corp (NVDA.O), posted an 80% jump in quarterly profit last month, but struck a more cautious note than usual on upcoming demand.
“I suspect Berkshire has a belief that the world cannot do without the products manufactured by Taiwan Semi,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, which owns Berkshire shares.
“Only a small number of companies that can amass the capital to deliver semiconductors, which are increasingly central to people’s lives,” he added.
Berkshire has had mixed success in technology.
Its more than six-year wager during the last decade in IBM Corp (IBM.N) did not pan out, but Berkshire is sitting on huge unrealized gains on its $126.5 billion stake in Apple, which Buffett views more as a consumer products company.
Apple is by far the largest investment in Berkshire’s $306.2 billion equity portfolio.
Berkshire disclosed the TSMC stake about 2-1/2 months after it began reducing a decade-old, multi-billion dollar stake in BYD Co (002594.SZ), China’s largest electric car company.
In the third quarter, Berkshire added to its stakes in Chevron Corp (CVX.N), Occidental Petroleum Corp (OXY.N), Celanese Corp (CE.N), Paramount Global (PARA.O) and RH (RH.N).
It also sold shares of Activision Blizzard Inc (ATVI.O), Bank of New York Mellon Corp (BK.N), General Motors Co (GM.N), Kroger Co (KR.N) and US Bancorp (USB.N).
Buffett, 92, has run Berkshire since 1965. The Omaha, Nebraska-based company also owns dozens of businesses such as the BNSF railroad, the Geico auto insurer, several energy and industrial companies, Fruit of the Loom and Dairy Queen.
Reporting by Jonathan Stempel in New York; Editing by David Gregorio and Bradley Perrett
Our Standards: The Thomson Reuters Trust Principles.
How TSMC and US-China Tensions May Dictate Fate of Global Economy
- The fate of the global economy may rest on the shoulders of one company: TSMC.
- TSMC is the world’s biggest chipmaker — its chips power everything from cars to iPhones.
- But US-China tensions, and China’s standoff with Taiwan, could cost the global economy trillions.
On a tiny island off the coast of China, one company manufactures a product used across the globe for countless household products as varied as PCs and washing machines.
And as that island — Taiwan — worries about the threat of a standoff between the US and China, the world’s economy holds its breath. That’s because there could be trillions of dollars’ worth of economic activity tied to that one company: Taiwan Semiconductor Manufacturing Company, the world’s biggest chipmaker.
Industry watchers say an escalating dispute between the US and China over Taiwan could drag down the global economy, given the fact that no other company makes such advanced chips at such a high volume. If TSMC goes offline, they say, the production of everything from cars to iPhones could screech to a halt.
“If China would invade Taiwan, that would be the biggest impact we’ve seen to the global economy — possibly ever,” Glenn O’Donnell, the vice president and research director at Forrester, told Insider. “This could be bigger than 1929.”
What is TSMC?
VCG/VCG via Getty Images
While TSMC may not be a household name, you almost certainly own something that’s powered by its chips.
TSMC is in the foundry business, meaning it doesn’t design its own chips but instead produces them at fabrication plants for other companies. The company accounts for over half of the global semiconductor market, and when it comes to advanced processors that number is, by some estimates, as high as 90%. In fact, even the best chip from China’s top semiconductor manufacturer, SMIC, has been said to be about five years behind TSMC’s.
TSMC counts Apple as its biggest customer, supplying the California tech giant with the chips that power iPhones. In fact, most of the world’s roughly 1.4 billion smartphone processors are produced by TSMC, as are about 60% of the chips used by automakers, according to The Wall Street Journal.
TSMC semiconductors are also used in high-performance computing: They can quickly process reams of data and guide missiles, making the company highly valuable in the eyes of government entities.
As TSMC has grown to dominate the industry, it has automatically become an oligopoly, according to William Alan Reinsch, a senior advisor at the Center for Strategic and International Studies, a national security think tank.
“When you have a very complex, very sophisticated, and very expensive technology where barriers to entry are very high — I mean, building a fab plant is in the billions — you can’t just decide tomorrow, ‘Well, I’m going to go into that business,'” he said. “It’s not like making tea.”
How did we become so reliant on chips made in Taiwan?
Ann Wang/Reuters
The semiconductor industry has its roots in the US, as much of the research and development is done on US soil. Companies in other countries license the US-made technology.
Dylan Patel, a chief analyst at the semiconductor research and consulting firm SemiAnalysis, pointed to the Dutch company ASML as an example: ASML produces high-end chipmaking equipment, but one of the technologies for which it’s best known was invented in the US National Laboratories.
Over the past 30 years or so, manufacturers in developed countries concluded it was in their best interest to outsource the manufacturing of the chips, according to Reinsch.
“You build a big factory and you crank these things out by the thousands, and you do it in a low-wage, nonunion country that probably doesn’t have environmental requirements,” he said. “You keep all the design and IP at home and you do all your sales, marketing, and service at home, and that’s where you make the money.”
It’s this approach that has directly led to the growth of chip foundries like TSMC and reduced production on American soil, Reinsch said.
According to a 2021 report from the Semiconductor Industry Association, in 1990 the US produced 37% of the world’s chip supply. These days, the US is responsible for only 12% of global chip production.
Why is this a problem now?
Mike Blake/REUTERS
As the coronavirus pandemic and the war in Ukraine have illustrated, having too much reliance on certain countries can upend supply chains when disruptions arise. It’s for this reason that many US corporations are exploring “onshoring” — moving some of their manufacturing to the US — to make their supply chains more resilient.
The US’s access to TSMC chips, however, is especially vulnerable, because though Taiwan is self-governing, China claims the island as its own and has threatened to invade. Controlling Taiwan is central to Chinese President Xi Jinping’s goal of achieving a “great rejuvenation of the Chinese nation” by 2049, the 100th anniversary of the People’s Republic of China.
While the consequences of an invasion could be significant, many experts say it’s just a matter of time before it happens, whether it’s by 2030, 2025, or even by the end of next year. On Monday, US Secretary of State Antony Blinken predicted China would take steps to annex Taiwan on a “much faster timeline” than previously thought, signaling that it could be sooner rather than later. The US government is already playing out war-game scenarios to prepare for this, and in the event of a full invasion it would reportedly consider evacuating the skilled chipmaker engineers on which it’s become so reliant.
The spotlight has focused increasingly on Taiwan and the semiconductor industry as a whole in recent weeks following the export regulations the US government slapped on China. Those regulations limit sales of semiconductors made using US technology and are meant to curb China’s ability to develop advanced technology.
The US and China are now locked in what Patel described as “a full-scale bilateral economic cold war,” one that’s likely to have severe financial repercussions, especially given how intertwined the semiconductor supply chain is.
What would happen if China invaded Taiwan?
Alexander Vilf – Host Photo Agency via Getty Images
Taiwan hopes its semiconductor business will protect it from Chinese aggression — government leaders have called the industry a “silicon shield” against invasion.
But if China did invade, disrupting the world’s access to chips, “the entire global economy comes to a screeching halt,” O’Donnell from Forrester said. “Semiconductors have become almost like the oxygen of the global economy,” he said. “Without the chips, you can’t breathe.”
The effects of such a halt would be “economically devastating,” says Martijn Rasser, a former senior intelligence officer at the CIA who is now a security and technology expert at the Center for a New American Security, a left-leaning think tank.
“You’d be looking at trillions of dollars in economic losses,” he told Insider.
The US National Security Council agrees, and in July the US commerce secretary said the US would face a “deep and immediate recession” if American businesses no longer had access to these chips.
Some experts have speculated that, in the event of an invasion, the chip-manufacturing facilities would be intentionally destroyed so China couldn’t access them. In a US Army journal article published in December, the academic Jared McKinney described this strategy as the “broken nest” — another way to put it is mutually assured destruction.
The destruction of those facilities, or an inability to access their chips, could have major national security implications, Rasser said.
“Every military system that we rely on has a ton of semiconductors in them,” he said. “It would start impacting our ability to maintain existing weapon systems, upgrade ones, build new ones.”
Considering that the US has committed to defending Taiwan in the event of a Chinese invasion, these hits to the US’s defense capabilities could be especially significant.
But while a Chinese invasion of Taiwan would produce the most serious disruption, Rasser says it wouldn’t necessarily take an invasion for the world’s chip access to be blocked. As well as making investments in Taiwanese firms and poaching their workers, China could institute a blockade on the island that could cut off the world from semiconductor supplies.
What’s the solution?
SAUL LOEB/AFP via Getty Images
The US is taking some steps to make itself less reliant on Taiwan. In July, for instance, Congress passed the CHIPS Act, which includes nearly $53 billion in subsidies and tax breaks in an effort to bolster chip manufacturing in the US.
Some companies have already begun adding US facilities: Intel is building two $20 billion factories in Ohio, Micron has pledged to spend up to $100 billion on a massive chip factory in upstate New York, Samsung is building a $17 billion factory in Texas, and TSMC is constructing a $12 billion plant in Arizona.
TSMC is also building a new facility in Japan, one that will produce the less advanced chips needed in the auto industry. The Wall Street Journal reported that Japanese officials had signaled they’d like TSMC to expand its presence there by adding capacity for advanced chips as well, another sign global powers are growing wary of the geopolitical risk to Taiwan.
But O’Donnell warned it would be premature to celebrate an end to the chip shortage or to the US’s reliance on Taiwanese chips. The factories themselves require equipment that’s in short supply because of — ironically enough — the chip shortage. And besides, those plants take years to build and get online.
“Once you stick a shovel in the ground, you’re not going to get chips for at least three years,” he said.
Plus, there remain obstacles to substantially decreasing the country’s reliance on TSMC. While the subsidies and tax breaks will help, Taiwan may continue to remain the cheaper option for businesses. And, for the time being at least, TSMC’s chips are likely to be higher quality as well. Given that TSMC is “really at the cutting edge,” Rasser said, the chips produced in the US by Intel, for instance, “wouldn’t be as sophisticated” as those made in Taiwan.
While producing even these lower-quality chips would go some way to reduce the US’s reliance on Taiwan, the US has a shortfall of the skilled workforce needed to ramp up production, a problem companies in this industry are facing across the globe. Rasser says enhanced training and education will be necessary to fill this gap.
It’s for these reasons that it could be “years and potentially decades” before the US will be able to declare independence on the chipmaking front.
“The CHIPS Act, it’s a good step in the right direction, but it’s just a little more than scratching the surface,” Rasser said.
In the meantime, the US may have to cross its fingers that an economy-shaking disruption doesn’t come to pass.
How TSMC and US-China Tensions May Dictate Fate of Global Economy
- The fate of the global economy may rest on the shoulders of one company: TSMC.
- TSMC is the world’s biggest chipmaker — its chips power everything from cars to iPhones.
- But US-China tensions, and China’s standoff with Taiwan, could cost the global economy trillions.
On a tiny island off the coast of China, one company manufactures a product used across the globe for countless household products as varied as PCs and washing machines.
And as that island — Taiwan — worries about the threat of a standoff between the US and China, the world’s economy holds its breath. That’s because there could be trillions of dollars’ worth of economic activity tied to that one company: Taiwan Semiconductor Manufacturing Company, the world’s biggest chipmaker.
Industry watchers say an escalating dispute between the US and China over Taiwan could drag down the global economy, given the fact that no other company makes such advanced chips at such a high volume. If TSMC goes offline, they say, the production of everything from cars to iPhones could screech to a halt.
“If China would invade Taiwan, that would be the biggest impact we’ve seen to the global economy — possibly ever,” Glenn O’Donnell, the vice president and research director at Forrester, told Insider. “This could be bigger than 1929.”
What is TSMC?
VCG/VCG via Getty Images
While TSMC may not be a household name, you almost certainly own something that’s powered by its chips.
TSMC is in the foundry business, meaning it doesn’t design its own chips but instead produces them at fabrication plants for other companies. The company accounts for over half of the global semiconductor market, and when it comes to advanced processors that number is, by some estimates, as high as 90%. In fact, even the best chip from China’s top semiconductor manufacturer, SMIC, has been said to be about five years behind TSMC’s.
TSMC counts Apple as its biggest customer, supplying the California tech giant with the chips that power iPhones. In fact, most of the world’s roughly 1.4 billion smartphone processors are produced by TSMC, as are about 60% of the chips used by automakers, according to The Wall Street Journal.
TSMC semiconductors are also used in high-performance computing: They can quickly process reams of data and guide missiles, making the company highly valuable in the eyes of government entities.
As TSMC has grown to dominate the industry, it has automatically become an oligopoly, according to William Alan Reinsch, a senior advisor at the Center for Strategic and International Studies, a national security think tank.
“When you have a very complex, very sophisticated, and very expensive technology where barriers to entry are very high — I mean, building a fab plant is in the billions — you can’t just decide tomorrow, ‘Well, I’m going to go into that business,'” he said. “It’s not like making tea.”
How did we become so reliant on chips made in Taiwan?
Ann Wang/Reuters
The semiconductor industry has its roots in the US, as much of the research and development is done on US soil. Companies in other countries license the US-made technology.
Dylan Patel, a chief analyst at the semiconductor research and consulting firm SemiAnalysis, pointed to the Dutch company ASML as an example: ASML produces high-end chipmaking equipment, but one of the technologies for which it’s best known was invented in the US National Laboratories.
Over the past 30 years or so, manufacturers in developed countries concluded it was in their best interest to outsource the manufacturing of the chips, according to Reinsch.
“You build a big factory and you crank these things out by the thousands, and you do it in a low-wage, nonunion country that probably doesn’t have environmental requirements,” he said. “You keep all the design and IP at home and you do all your sales, marketing, and service at home, and that’s where you make the money.”
It’s this approach that has directly led to the growth of chip foundries like TSMC and reduced production on American soil, Reinsch said.
According to a 2021 report from the Semiconductor Industry Association, in 1990 the US produced 37% of the world’s chip supply. These days, the US is responsible for only 12% of global chip production.
Why is this a problem now?
Mike Blake/REUTERS
As the coronavirus pandemic and the war in Ukraine have illustrated, having too much reliance on certain countries can upend supply chains when disruptions arise. It’s for this reason that many US corporations are exploring “onshoring” — moving some of their manufacturing to the US — to make their supply chains more resilient.
The US’s access to TSMC chips, however, is especially vulnerable, because though Taiwan is self-governing, China claims the island as its own and has threatened to invade. Controlling Taiwan is central to Chinese President Xi Jinping’s goal of achieving a “great rejuvenation of the Chinese nation” by 2049, the 100th anniversary of the People’s Republic of China.
While the consequences of an invasion could be significant, many experts say it’s just a matter of time before it happens, whether it’s by 2030, 2025, or even by the end of next year. On Monday, US Secretary of State Antony Blinken predicted China would take steps to annex Taiwan on a “much faster timeline” than previously thought, signaling that it could be sooner rather than later. The US government is already playing out war-game scenarios to prepare for this, and in the event of a full invasion it would reportedly consider evacuating the skilled chipmaker engineers on which it’s become so reliant.
The spotlight has focused increasingly on Taiwan and the semiconductor industry as a whole in recent weeks following the export regulations the US government slapped on China. Those regulations limit sales of semiconductors made using US technology and are meant to curb China’s ability to develop advanced technology.
The US and China are now locked in what Patel described as “a full-scale bilateral economic cold war,” one that’s likely to have severe financial repercussions, especially given how intertwined the semiconductor supply chain is.
What would happen if China invaded Taiwan?
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Taiwan hopes its semiconductor business will protect it from Chinese aggression — government leaders have called the industry a “silicon shield” against invasion.
But if China did invade, disrupting the world’s access to chips, “the entire global economy comes to a screeching halt,” O’Donnell from Forrester said. “Semiconductors have become almost like the oxygen of the global economy,” he said. “Without the chips, you can’t breathe.”
The effects of such a halt would be “economically devastating,” says Martijn Rasser, a former senior intelligence officer at the CIA who is now a security and technology expert at the Center for a New American Security, a left-leaning think tank.
“You’d be looking at trillions of dollars in economic losses,” he told Insider.
The US National Security Council agrees, and in July the US commerce secretary said the US would face a “deep and immediate recession” if American businesses no longer had access to these chips.
Some experts have speculated that, in the event of an invasion, the chip-manufacturing facilities would be intentionally destroyed so China couldn’t access them. In a US Army journal article published in December, the academic Jared McKinney described this strategy as the “broken nest” — another way to put it is mutually assured destruction.
The destruction of those facilities, or an inability to access their chips, could have major national security implications, Rasser said.
“Every military system that we rely on has a ton of semiconductors in them,” he said. “It would start impacting our ability to maintain existing weapon systems, upgrade ones, build new ones.”
Considering that the US has committed to defending Taiwan in the event of a Chinese invasion, these hits to the US’s defense capabilities could be especially significant.
But while a Chinese invasion of Taiwan would produce the most serious disruption, Rasser says it wouldn’t necessarily take an invasion for the world’s chip access to be blocked. As well as making investments in Taiwanese firms and poaching their workers, China could institute a blockade on the island that could cut off the world from semiconductor supplies.
What’s the solution?
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The US is taking some steps to make itself less reliant on Taiwan. In July, for instance, Congress passed the CHIPS Act, which includes nearly $53 billion in subsidies and tax breaks in an effort to bolster chip manufacturing in the US.
Some companies have already begun adding US facilities: Intel is building two $20 billion factories in Ohio, Micron has pledged to spend up to $100 billion on a massive chip factory in upstate New York, Samsung is building a $17 billion factory in Texas, and TSMC is constructing a $12 billion plant in Arizona.
TSMC is also building a new facility in Japan, one that will produce the less advanced chips needed in the auto industry. The Wall Street Journal reported that Japanese officials had signaled they’d like TSMC to expand its presence there by adding capacity for advanced chips as well, another sign global powers are growing wary of the geopolitical risk to Taiwan.
But O’Donnell warned it would be premature to celebrate an end to the chip shortage or to the US’s reliance on Taiwanese chips. The factories themselves require equipment that’s in short supply because of — ironically enough — the chip shortage. And besides, those plants take years to build and get online.
“Once you stick a shovel in the ground, you’re not going to get chips for at least three years,” he said.
Plus, there remain obstacles to substantially decreasing the country’s reliance on TSMC. While the subsidies and tax breaks will help, Taiwan may continue to remain the cheaper option for businesses. And, for the time being at least, TSMC’s chips are likely to be higher quality as well. Given that TSMC is “really at the cutting edge,” Rasser said, the chips produced in the US by Intel, for instance, “wouldn’t be as sophisticated” as those made in Taiwan.
While producing even these lower-quality chips would go some way to reduce the US’s reliance on Taiwan, the US has a shortfall of the skilled workforce needed to ramp up production, a problem companies in this industry are facing across the globe. Rasser says enhanced training and education will be necessary to fill this gap.
It’s for these reasons that it could be “years and potentially decades” before the US will be able to declare independence on the chipmaking front.
“The CHIPS Act, it’s a good step in the right direction, but it’s just a little more than scratching the surface,” Rasser said.
In the meantime, the US may have to cross its fingers that an economy-shaking disruption doesn’t come to pass.
TSMC Cuts Capital Spending 10% in a Warning for Tech Sector
(Bloomberg) — Taiwan Semiconductor Manufacturing Co. slashed its 2022 capital spending target by roughly 10%, a dramatic sign of trouble for the technology industry from the world’s most valuable chip company.
TSMC said it expects to spend about $36 billion in 2022 on capital equipment, down from at least $40 billion previously. The sharp reduction in expenditure — an important indicator of its own expectations for growth across sectors from smartphones to servers and electric vehicles — suggest the Taiwanese firm is bracing for a broader-than-anticipated downturn.
TSMC and its peers are grappling with Washington’s sweeping restrictions on doing business with China, which are sending shock waves through the global semiconductor industry. Applied Materials Inc., a leading producer of chip-making equipment, slashed its forecast for the fourth quarter, while Intel Corp. is said to be preparing to fire thousands.
The moves unveiled last week are the Biden administration’s most aggressive yet as it tries to stop China from developing technological capabilities it sees as a threat. The actions, which have incensed Beijing, threaten to disrupt a global economy already dealing with a potential global recession, soaring inflation and lingering supply snarls.
It’s “too early to provide a specific number, however the inventory correction will likely see its biggest impact sometime in the first half of 2023,” Chief Executive Officer C. C. Wei told analysts on a conference call. The impact of the US curbs will be manageable, he said.
Click here for a live blog of TSMC’s results.
TSMC’s shares have tanked this week, taking its market capitalization to about $320 billion from more than $550 billion in January.
The company, which reported better-than-estimated third-quarter net income of NT$280.9 billion ($8.8 billion), is projecting revenue of $19.9 billion to $20.7 billion in the December quarter, though that assumes certain US dollar expectations at a time Asian currencies have weakened.
The Biden administration measures limit the ability of companies that use US technology to sell products to China. They include restrictions on the export of some types of chips used in artificial intelligence and supercomputing, and also tighter rules on the sale of semiconductor equipment to any Chinese company.
The restrictions make it more difficult for chipmakers to move their inventories and hit TSMC more severely than previous actions by the US, Fubon Research analysts led by Sherman Shang said in a note this week. The curbs mean about 5%-8% of TSMC’s total revenue will likely be restricted, they said. Bloomberg Intelligence estimates TSMC could lose more than 10% of its annual sales because of the restrictions.
Still, Taiwan’s largest company is betting on its massive size and industry-leading technology to navigate its biggest challenges in years. Hsinchu, Taiwan-based TSMC is the world’s largest contract chipmaker, producing for the likes of Qualcomm Inc., Apple Inc. and Nvidia Corp., all of which sell a significant portion of their products into the Chinese market.
On Thursday, executives reaffirmed their long-term targets for revenue and declared 2023 a year of growth. TSMC also pledged to continue expanding around the globe as needed, including in China.
Executives said that they won a license from the US to continue operating and building out their 16 nanometer and 28 nanometer lines at Nanjing in China, joining companies from SK Hynix Inc. To Samsung Electronics Co. in announcing they had secured exemptions to the chip curbs from Washington.
The outlook for the electronics industry had begun to darken even before the upheaval engendered by Biden’s curbs.
Macroeconomic shocks have suppressed consumer demand and business spending, while unsold inventory among PC vendors built up. Third-quarter shipments of desktop and laptop computers slumped 15%, according to IDC data, and chip companies like Advanced Micro Devices Inc. have said they were surprised by the speed and sharpness of the downturn in demand. Memory makers Micron Technology Inc. and Kioxia Holdings Corp. have announced cutbacks in output of as much as 30% to try and stabilize prices.
TSMC may not be able to rely on sustained demand for products of Apple, its main customer, whose growth has benefited the Taiwanese manufacturer for years.
While the California company has launched new types of chips to boost the performance of its devices, it has recently backed off plans to increase production of its new iPhones, raising further questions about underlying electronics demand.
(Updates with executives’ comments from the third paragraph)
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Taiwan stocks down more than 4% in mixed Asia trade as TSMC plunges 8%
Pedestrians cross a street in front of the Tokyo Stock Exchange, operated by Japan Exchange Group, in Tokyo, Japan.
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Shares in the Asia-Pacific were mixed on Tuesday, while Taiwan’s benchmark index dropped more than 4% on its return to trade after a holiday, as investors weighed the impact of new U.S. rules on chipmaker TSMC.
Japan and South Korea’s markets also resumed trading after a holiday on Monday. The Nikkei 225 fell 2.6% and the Topix lost 1.9%. In South Korea, the Kospi fell 2.35% and the Kosdaq shed 4.3%.
Hong Kong’s Hang Seng index fell 1.56% and the Hang Seng Tech index dropped 2.96%. In Australia, the S&P/ASX 200 gave up earlier gains and was about flat.
The Shanghai Composite in mainland China gained 0.4% and the Shenzhen Component rose 0.876%. MSCI’s broadest index of Asia-Pacific shares outside Japan fell nearly 2%.
“Equities continue to sell off as the impact of tighter monetary policy spooks investors,” ANZ Research analysts wrote in a note Tuesday.
Overnight on Wall Street, the Nasdaq Composite closed at its lowest since July 2020, down 1.04% at 10,542.10, dragged lower by a slump in semiconductor stocks.
The S&P 500 also slipped 0.75% to 3,612.39, while the Dow Jones Industrial Average shed 93.91 points, or 0.32%, to close at 29,202.88.
— CNBC’s Carmen Reinicke and Alex Harring contributed to this report.