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Daily Maverick
12-05-2025
- Business
- Daily Maverick
Crossed Wires: The most important company in the world and the storm brewing around it
Is it Apple? Alphabet? OpenAI? Nvidia? Microsoft? Amazon? Nope, it is none of these, critical to the global economy as they may be. It is a company most people have never even heard of. It is Taiwan Semiconductor Manufacturing Company, otherwise known as TSMC. If you think China is threatening to invade Taiwan because of its potential geo-military importance or its history or its valuable real estate, forget it. It is because of TSMC. The company sits with its finger in the dyke behind which is a roiling and dangerous sea of geopolitics. No, wait. Perhaps the most important company in the world is actually ASML, based in Veldhoven, in the Netherlands. We'll get to them later. So what are these companies and why have they become the firing pin of a global hand grenade? The short answer is that TSMC manufactures the world's most advanced semiconductor chips. America has no equivalent. China has no equivalent. They stand alone; no competitors come close. Let's rewind. TSMC is a relatively new company. It was started in Taiwan in 1987 by MIT-educated Morris Chang as the world's first 'pure play foundry'. This meant that they did not design chips but only manufactured them, and never under their own name (unlike competitors such as Samsung). They were originally at the bottom of the food chain — give us a chip design, they told the world's tech giants, and we will give you the physical object, perfectly manufactured, no defects, on time and on budget. I suppose at the time this was to be expected. Taiwan was well respected as a reliable high-volume, high-tech, affordable manufacturer, but not much more than that. Apple and Qualcomm and others were (and still are) happy to hand over their designs to Taiwan for manufacture. But then TSMC got serious about being the best. They raised billions from shareholders and poured money into research and development. It wasn't just about automation or bigger plants or smoother supply chains. Their core area of research and development was focused on mastering technologies and processes that would allow them to pack more and more transistors onto a single piece of silicon. Semiconductor pioneer Remember Moore's Law? It was posited by Gordon Moore, a semiconductor pioneer in the early 1970s. Moore's Law predicted that the number of transistors in an integrated circuit would double about every two years. TSMC has been the embodiment of that law, almost as though it was written for them — their North Star. How large does the company loom today? A total of 25% of Taiwan's GDP comes from semiconductors, and TSMC dominates the industry. It constitutes 30% of Taiwan's stock market value. It will exceed $100-billion in revenue and $50-billion in profits this year. It owns 67% of the global foundry market. It manufactures one-third of all the chips in the world. It manufactures more than 90% of the world's most advanced chips. In 2023, Wired writer Virginia Heffernan went to Taiwan to report on the company and the headline of her article was 'I Saw the Face of God in a Semiconductor Factory'. Perhaps it was only partially hyperbolic. In short, the company is large, profitable, dominant, defendable — and vital. And so it happened that all the tech companies handed their chip designs to TSMC for manufacturing. None of them believed that mere manufacturing was 'core'' internet protocol. TSMC was seen as a serf, a manufacturing gun for hire. Yes, well, but… in the last 37 years TSMC has built the biggest, baddest gun in the world. They are used by Apple, Tesla, Nvidia, AMD, Qualcomm, Broadcom and even other chip manufacturers. The company has created, in effect, a benign monopoly, gladly providing a completely differentiated and unique and core service to all comers. How did they attain this vaunted position in the value chain of high tech? By investment in research and development, over and over again, until they built a moat so wide that the competitive expense of crossing it became prohibitive. Michael Spencer, a widely read tech commentator and blogger, makes the stakes clear in a recent article: 'A (Chinese) threat to the island nation of Taiwan (e.g, like a blockade or invasion) and supply chains of TSMC, would immediately plunge the global economy into a severe recession. It would also likely spark a hot war involving the US, Japan and other allies.' But, as always with politics, the story gets complicated, especially where Trump is involved. TSMC started to establish joint ventures in other countries (such as Germany) around 2020, well before Trump 2.0. Biden's Chips Act provided some of the kickstart funding ($11.6-billion) for the establishment of a fab plant in Arizona in 2020. Fast forward to 2025 and the Trump tariffs, and suddenly we have the chairperson of TSMC, CC Wei, at the White House announcing a $100-billion investment in TSMC US. Good for the US, good for Taiwan, right? Not so fast. It is not at all clear whether TSMC can produce chips at a profit in the US, given the labour costs, red tape, and, after decades of neglect, a significantly thinned-out high-tech manufacturing skills base. And then there is the uber-advanced end of their product line, the so-called 2nm and 3nm nodes, which are the most efficient and densely populated with transistors. The government of Taiwan is putting its foot down — those stay in Taiwan. Further wrinkle To add a further wrinkle, we have ASML, a Dutch company, which provides a critical piece of TMSC's chip manufacturing puzzle (probably the only piece not built by them) — the ultra-violet lithography kit that etches millions of minute corridors into the silicon, the 'roadways' for electrons, a necessary step without which the chip cannot be manufactured. ASML is the only company in the world with the know-how to manufacture such a machine. It has taken more than 30 years of development and tens of billions invested. You can't get the kit anywhere else and, as with TSMC, this makes for a very deep moat. The US can't allow Taiwan to be invaded by China in case they choke off the supply of advanced chips to the US and the West more generally. For their part, the Chinese can't stand helplessly by watching TMSC empower the US with the world's most advanced chips. This leaves us with one Taiwanese company and one Dutch company standing between two covetous superpowers which both want control over the supply and manufacture of the tiny brains that now power the entire world. Neither can afford to have the other win. And presumably, AMSL simply wants everyone to bugger off so they can sell their admirable kit in peace. The standoff is not going to last. It seems likely that China will indeed invade Taiwan — all indicators point in that direction. Let us hope that TSMC's internet protocol is properly externalised to other countries by the time it happens. DM
Yahoo
24-04-2025
- Business
- Yahoo
Taiwan Semiconductor's Arizona Factory Faces $441 Million Loss Amid Supply Chain, Labor Cost Challenges
Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below. Taiwan Semiconductor Manufacturing Co's (NYSE:TSM) Arizona factory's substantial losses reflect the repercussions of Washington's attempt to restructure global semiconductor supply chains through political intervention. The chipmaker's Arizona facility incurred a loss of ~14.3 billion New Taiwan dollars ($441 million) in 2024, marking the most significant loss since its establishment, Global Times reported, citing Economic Daily News, the contract chipmaker's latest annual general meeting report. Trending: 'Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. You can invest today for just $0.26/share with a $1000 minimum. Contrastingly, the chipmaker's factory in Nanjing, East China's Jiangsu Province, reported 2024 revenue of nearly ~$26 billion New Taiwan dollars ($800 million). While the U.S. excels in chip design, it lags behind Asia, especially East Asia. The Arizona factory hugely depends on importing key components and raw materials, which drives logistics costs and extends the supply cycle. Additionally, high labor costs in the U.S. further inflate per-unit labor expenses. Taiwan Semiconductor founder Morris Chang estimated in March 2023 that chip costs in Arizona were 50% higher than its flagship production line in Taiwan. Contrastingly, the Nanjing facility benefits from China's efficient and stable industrial ecosystem, the report said. Maximize saving for your retirement and cut down on taxes: Schedule your free call with a financial advisor to start your financial journey – no cost, no obligation. In March, Taiwan Semiconductor announced an additional $100 billion investment in U.S. chipmaking (on top of its $65 billion in April 2024). The investment followed President Donald Trump's verbal attacks on Taiwan 'for stealing' the U.S. semiconductor business and generating massive trade deficits for Washington. Taiwan Semiconductor's first-quarter revenue rose 41.6% to $25.53 billion, topping the analyst consensus estimate of $23.92 billion. The second-quarter revenue guidance predicts $28.4 billion-$29.2 billion versus the $26.79 billion analyst estimate, with strong demand for 3-nm and 5-nm technologies. Read Next: BlackRock is calling 2025 the year of alternative assets. One firm from NYC has quietly built a group of 60,000+ investors who have all joined in on an alt asset class previously exclusive to billionaires like Bezos and Gates. If there was a new fund backed by Jeff Bezos offering a 7-9% target yield with monthly dividends would you invest in it? Photo by Jack Hong via Shutterstock Send To MSN: Send to MSN This article Taiwan Semiconductor's Arizona Factory Faces $441 Million Loss Amid Supply Chain, Labor Cost Challenges originally appeared on Sign in to access your portfolio
Yahoo
28-01-2025
- Business
- Yahoo
Trump calls China's DeepSeek AI leap a 'wake-up call' for US tech
US President Donald Trump has called Chinese AI start-up DeepSeek's strong showing a "wake-up call" and "positive" for America's tech sector, and also warned that he would slap tariffs on foreign-made semiconductor chips, including those made by Taiwan's TSMC, if they do not start producing them stateside. "Today and over the last couple of days, I've been reading about China and some of the companies in China, one in particular, coming up with a faster method of AI and much less expensive method. And that's good, because you don't have to spend as much money. I view that as a positive, as an asset", Trump told Republican lawmakers gathered at his Doral golf resort in Miami, Florida. He added: "The release of DeepSeek AI from a Chinese company, should be a wake up call for our industries, that we need to be laser focused on competing to win, because we have the greatest scientists in the world". Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team. Trump also pledged during his remarks that under his administration "we're going to unleash our tech companies, and we're going to dominate the future like never before", telling American tech firms that "you'll be doing that too, so you won't be spending as much, and you'll get the same result". DeepSeek's AI reasoning model R1 was published fully open-source last week. The announcement sparked a sell-off in US tech stocks on Monday, with investors fearing that the new AI model could threaten the dominance of current leaders in the space. The market jitters were particularly severe for US semiconductor giant Nvidia, which saw a staggering US$592.7 billion drop in market value amid growing concerns over China's rapidly advancing AI technology. According to DeepSeek, its latest AI model required less than US$6 million worth of Nvidia's less advanced H800 chips. This breakthrough represents a significant challenge to US policy, which has relied on sanctions and export controls to limit China's access to advanced technology. The H800 chips were introduced in November 2022 as a more affordable alternative for Nvidia's Chinese customers, just a month after the US imposed its initial restrictions on exports of advanced microchips and equipment to China. TSMC founder Morris Chang speaks at the new facility in Phoenix in 2022. In early April 2024, TSMC said it would expand its US investments to US$65 billion after the Biden administration pledged up to US$6.6 billion in incentives. Photo: AP alt=TSMC founder Morris Chang speaks at the new facility in Phoenix in 2022. In early April 2024, TSMC said it would expand its US investments to US$65 billion after the Biden administration pledged up to US$6.6 billion in incentives. Photo: AP> Last year, the US also pressured Taiwan - home to the world's largest chipmaker, Taiwan Semiconductor Manufacturing Company (TSMC) - to prevent the sale of its most advanced chips to mainland Chinese companies. TSMC has been constructing two plants in Arizona. The first, a $12 billion facility, was approved during Trump's first term as US president in 2020, which his administration touted as a significant win, while the second plant was announced during President Joe Biden's term in 2022. Biden approved nearly US$6 billion in subsidies under the Chips and Science Act, his signature initiative to bring chip manufacturing back to American soil. Speaking to CNBC a day before Trump's inauguration, TSMC Chief Financial Officer Wendell Huang expressed confidence that the funding would continue to flow under Trump as the fabrication plants reached construction and production milestones. The first fabrication plant in Arizona started producing advanced chips in the fourth quarter of last year, Huang said in the interview. He added that the construction of two plants in Arizona was on track, with the second expected to be operational in 2028. On Monday, Trump suggested he might impose tariffs on Taiwan and end subsidies for its tech companies manufacturing in the US. Warning about the imposition of tariffs on semiconductor chips, Trump remarked: "They left us, and they went to Taiwan, which controls about 98 per cent of the chip business, by the way." "We want them to come back, but we don't want to give them billions of dollars like this ridiculous programme Biden's offering. They already have billions of dollars," Trump continued. "We don't need to give them money. They're going to come back because it's in their interest to do so," he said, calling the establishment of plants in the US the "only way" to avoid tariffs. This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.
