Portrait of TSMC – the world’s ‘chip king’: An important link of the $ 400 billion industry, having an influence on the entire technology industry

Tram Ho

According to the Wall Street Journal, chip products from Taiwan Semiconductor Manufacturing Co (TSMC) appear everywhere without anyone noticing. The Taiwanese firm makes most of the world’s most sophisticated chips as well as countless simpler ones for the distribution chain. Its product list has billions of categories for different devices and brands, including Apple iPhones, personal computers, cars…

People often talk about Apple and Qualcomm, but in reality they are just designers, while the chip factory belongs to TSMC, a company that is not as famous.

Chân dung TSMC - ông vua chip của thế giới: Mắt xích quan trọng của ngành công nghiệp 400 tỷ USD, có tầm ảnh hưởng tới toàn ngành công nghệ - Ảnh 1.

Continuous investment in technology research and development has helped TSMC become the world’s largest semiconductor manufacturer

Over the years, TSMC has become the world’s leading semiconductor manufacturer with an influence that could shake up the global economy. Although the total market capitalization is only about 550 billion USD, ranking 11th in the world, the importance of TSMC is more evident than ever.

The Wall Street Journal reports that with more and more technologies needing to use electronic chips, TSMC’s importance has also increased accordingly. The context of the US-China trade war and the Covid-19 pandemic have disrupted chip supply and made TSMC’s products hotter than ever.

The chip company’s factories are not enough to supply other businesses, thereby indirectly creating supply chain disruptions because of a global shortage of equipment. This story is similar to how the world relied on oil supplies in the Middle East in the 1970s and the price of this black gold skyrocketed as soon as the Arab countries announced an oil export embargo.

Data from research firm TrendForce shows that Taiwanese chip companies including TSMC accounted for 65% of the world’s outsourced chip production revenue in the first quarter of 2021. TSMC itself accounted for 56%.

Chip King

TSMC had a profit of 17.6 billion USD in 2020 with total revenue of 45.5 billion USD. According to Capital Economics, it is extremely dangerous for the whole world to rely on a chip business, but it cannot be changed overnight for many reasons.

First, TSMC spent years developing the technology and now produces 92% of the most modern chips in the world, with the rest belonging to Samsung Electronics. For a simple example, most of the 1.4 billion mobile phone chips in the world today belong to TSMC.

Not stopping there, IHS Markit data shows that TSMC also produces up to 60% of less complex chips used for cars, especially self-driving cars being developed today.

Chân dung TSMC - ông vua chip của thế giới: Mắt xích quan trọng của ngành công nghiệp 400 tỷ USD, có tầm ảnh hưởng tới toàn ngành công nghệ - Ảnh 2.

Meanwhile, a report by Boston Consulting states that although the US is famous for chip designers like Intel, Nvidia or Qualcomm, they only account for 12% of production volume, down sharply from 37% in the previous year. 1990.

Recognizing the problem in the current chip crisis, US President Joe Biden has announced a plan to invest $ 50 billion in electronic chip production. China also plans to invest heavily in this segment, while Europe aims to produce 20% of the world’s chips by 2030 with an investment project of 150 billion USD.

However, according to experts, it is not easy to invest in electronic chips to catch up with competitors because chip factories in Taiwan also refuse to stand still and lose market share. The Wall Street Journal said that the semiconductor industry is a costly investment and when falling behind, it will be difficult for businesses to catch up with the leader without a breakthrough. Corporations can spend billions of dollars and years of research, but in the end they will only see the gap widen if there are not many technical breakthroughs.

A semiconductor factory can cost up to $20 billion, an advanced chip manufacturing device on complex circuit patterns can cost up to $100 million, among other requirements. Obviously, the electronic chip industry is extremely expensive and if not started early, it will be difficult to catch up when most countries have realized the importance of this segment.

TSMC itself also said that it will spend $ 100 billion in the next 3 years to develop technology, equivalent to nearly a quarter of the total investment capital of the whole industry for this segment.

IC Insight reports that countries around the world need to spend at least $30 billion a year for at least five years to have any hope of catching up with TSMC and Samsung.

According to PwC, the semiconductor industry had a total revenue of $481 billion in 2018. This number could grow to nearly $600 billion in the next four years. However, the number of companies that can actually process and create chips is not much.

Vision more than 30 years ago

In fact, TSMC’s success today is based on the great vision of Morris Chang, the founder of this company in 1987. In the context of garment outsourcing is still budding, this founder has believes that in the future, outsourcing electronic chip production will become an economic shield for Taiwan.

Chân dung TSMC - ông vua chip của thế giới: Mắt xích quan trọng của ngành công nghiệp 400 tỷ USD, có tầm ảnh hưởng tới toàn ngành công nghệ - Ảnh 3.

Founder Morris Chang is 89 years old this year

Recognizing the problem, the Taiwanese government sponsored half of the founding capital so that TSMC was enough to attract the attention of chip manufacturers at that time. When newly established, the big names in the industry like Intel or Texas Instruments all designed, manufactured, and advertised their chips themselves. Then people realized that by outsourcing to companies like TSMC, they could devote resources to R&D, product design.

AMD sold its chip manufacturing business to TSMC and became the company’s largest customer, and then many corporations followed suit and naturally made the Taiwanese chip maker a giant in the industry.

Professor David Yoffie of Harvard Business School, and a former member of Intel’s board of directors, emphasized that TSMC’s every move was as carefully calculated as playing chess. The impact of each deal is very small and by the time TSMC’s true strength emerges, it is too late to change the outcome.

It should be emphasized that TSMC has continuously doubled its investment (R&D) even during the crisis while other firms have sharply reduced to save costs. Founder Chang increased TSMC’s investment spending by 42%, reaching $2.7 billion in 2009 as the world was reeling from the 2008 crisis. Much of the money was aimed at expanding chip productivity for smartphone (smartphone).

Then the sweet fruit came in 2013 when TSMC became the main chip maker for Apple’s iPhone. Before that, rival Samsung was the main producer for the defective apple house.

To win the contract, TSMC spent up to 9 billion USD and 6,000 employees working continuously, thereby building a factory meeting Apple’s standards in a record time of 11 months.

In 2014, the company forced a research team of 400 engineers to work three shifts a day to come up with a new chip model.

Obviously, the current shortage of chip stories not only reveals the problem of the global supply chain, but it also shows the true strength of a business empire with a founder with a vision.

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Source : Genk