This company is sued, the technology community “FAIR”

Founded by the “father of Taiwan’s semiconductor industry” more than 30 years ago, TSMC now has an impact on the entire technology industry.

Founded by the “father of Taiwan’s semiconductor industry” more than 30 years ago, TSMC now has an impact on the entire technology industry. This company can make a series of partners nervous whenever difficulties.

GlobalFoundries News sued TSMC on August 27 as a whole shocking semiconductor industry. As the No. 3 and No. 1 chip processors, the copyright tensions between the two companies could disrupt chip supplies around the world.

The lawsuit could also cause a series of TSMC’s partners, including Apple, Lenovo, Qualcomm, and Nvidia, to ban sales of products in major markets such as the US and Germany.

“The biggest impact from this lawsuit, if GlobalFoundries wins, is that orders for imports into the US and EU will be stopped. This alone is enough to stop the recovery of technology industry in 2020, ”said Dan Hutcheson, CEO of VLSI Research.

When returning to Taiwan to found Taiwan Semiconductor Manufacturing Company, Morris Chang was nearly 60 years old. He spent 25 years working at Texas Instrument (TI), up to the company’s vice president. However, the reputation of this man is not enough to ensure the success of TSMC, the first semiconductor specialist company in the world.

“At that time, nobody thought we could do anything,” recalls Morris Chang. However, it was doubts that made TSMC comfortable without any competition for eight years, until they opened the first semiconductor factory in the US.

It’s hard to imagine a small company focusing on outsourcing will one day surpass the giant in Silicon Valley Intel. However, they really did. In 2017, TSMC’s market capitalization exceeded Intel for the first time. Later that year, when Morris Chang actually retired at the age of 86, he was honored as “the father of Taiwan’s semiconductor industry”.

“To Taiwanese people, Chang is more than just a successful engineer and entrepreneur. He contributed to bringing Taiwan to the global technology map, ”wrote the EE Times in 2000.

The success model of TSMC is their model. TSMC chooses to become a processing company for all partners who already have chip designs, which is a far cry from traditional chip companies like Intel. Morris Chang once said that this orientation helps TSMC not to compete with customers, and not to change the way the market operates in the fluctuating technology.

“A decent company must have a chip factory,” AMD founder Jerry Sanders once said. However, the fact has proved that outsourcing companies like TSMC are the choice for most technology partners.

Today their customers are not only big names like Apple and Qualcomm but also AMD and Intel, the two leading companies in microprocessors for computers. As the world’s number one chip processing company, with a market share of approximately 50%, TSMC’s annual revenue reaches tens of billions of dollars.

According to PwC, the semiconductor industry has a total revenue of 481 billion USD in 2018. This figure could increase to nearly 600 billion USD in 4 years. However, the number of companies that can actually outsource, creating chips, is not much.

The reason is that the investment amount for a factory is very large. At the end of 2017, TSMC said its newest factory to research and produce chips on the 3 nm process cost an investment of up to $ 20 billion . Therefore, most technology firms look to outsourcing companies like TSMC.

AMD itself, the company that once proudly designed and manufactured the chip, is now a major customer of TSMC after selling a stake in GlobalFoundries.

“It was one of our best decisions. It allows us to manage risks and focus on making our products better, ”said AMD CEO Lisa Su.

As a chip processing company, TSMC does not limit its customers. According to Bloomberg, the trend of many large companies is to develop their own chips. In November 2018, Amazon announced the first server processor called Graviton, manufactured by TSMC. This chip has similar performance but is 40% cheaper than Intel’s. According to Amazon Web Services vice president Matt Garman, without TSMC, it is difficult for Amazon to achieve its own chip making goal.

TSMC’s strong growth over the past few years, not coincidentally, coincides with the advancement in smartphone processing technology. According to Bloomberg, it is the evolution of the smartphone that has helped the company rise, while rivals like Intel have not yet entered the new game.

In terms of total revenue, the current smartphone market is 6 times more than PCs. TSMC’s customers are big companies in the mobile village. Apple alone has abandoned Samsung, choosing TSMC to be the only manufacturer for the Apple A chips it designs. Apple chips account for 75% of the 7 nm chips manufactured by TSMC, according to EE Times. The company will continue to hold the monopoly position on manufacturing chips for Apple until at least 2020.

“TSMC can continuously produce the latest chips in a timely manner, without error,” said Mark Li, an analyst at Sanford C. Bernstein. According to Li, this is why TSMC can challenge Intel’s position in the field of chip processing.

TSMC is also ready to meet chips for new businesses. In 2017, when the digital craze was on the rise, TSMC made nearly $ 1 billion from mining chips. 60% of Bitmain’s chips come from TSMC.

In addition to the advantage of early start, TSMC takes the No. 1 position in the semiconductor processing industry mainly thanks to the technological superiority. The most visible example is the ability to deploy production in new processes.

In 2013, when Intel started manufacturing on the 14 nm process, TSMC applied the 20 nm process. In 2019, Intel will introduce the first CPUs using the 10 nm process, while TSMC has been processing 7 nm chips for customers since the end of 2018.

In 2018, the company spent $ 2.75 billion on research and development. This is small compared to Intel’s more than $ 10 billion , but they have a great advantage of being partners. According to Goldman Sachs, research costs of major partners such as Qualcomm, Apple, Nvidia, Huawei will reach 20 billion USD in 2020, at least 4 billion more than Intel’s budget.

TSMC’s partners do not spare money to invest in research, because they also need to create more powerful, superior chips than their competitors. Design and outsourcing are no longer two separate processes, but companies must work closely together.

“A decade ago, customers only needed to design a simple design and the factory would process them. Now the design is much more complex, ”said Mark Liu, TSMC President. According to Liu, partners can now work with TSMC’s “ecosystem” for many years to make a complete chip.

Bitmain, a company that makes cryptocurrency mining machines, has spent three years, sending engineers to TSMC to jointly develop ASIC chips for their miners. This is just one of hundreds of companies working with TSMC. With such investment costs, customers will surely want to stick with TSMC instead of having to switch to another processing company.

“TSMC is in no better situation. They have stable revenue from partners like Apple, when the company does not want to cooperate with rivals like Samsung, to invest in research and development with numbers that rivals cannot compare. This helps their technology to excel, thereby attracting more customers, ”the Economist said.

“They act as a kind of self-fulfilling prophecy. They are the number one company, and the top companies will come together by themselves, ”said Debora Shoquist, Nvidia’s Vice President of Operations.

The dependence of the whole technology industry on TSMC’s machinability is the reason why the semiconductor industry shook when GlobalFoundries sued TSMC. The US-based chip processing company is behind the technology, declaring it has stopped developing the 7 nm process since 2018. The lawsuit is said to “borrow the wind to break bamboo shoots”, during the US-China trade war. still going on.

“GlobalFoundries wants to portray the image of Asia benefiting from Western technological advances. This is a desperate act for them to make a profit from the technology, when they gave up in the race on production processes and stopped joining high-tech manufacturing industry last year, ”said Mark Li, a senior manager of the company. analysis at Bernstein Research commented.

While analysts think GlobalFoundries’ ability to win a lawsuit is small, this lawsuit clearly shows TSMC’s influence in the technology industry. If TSMC loses, a number of big players will be affected, banning the sale of products in major markets.

“It is TSMC who is putting their customers and the entire supply chain at risk,” said a warning from Vice President Sam Azar of GlobalFoundries showing how the industry is dependent on the Taiwanese company.

So far, no company has been able to compete with TSMC. GlobalFoundries is no longer technologically strong. Intel didn’t even produce the CPU itself, had to work with Samsung to make the CPU.

Samsung is probably the biggest challenge for TSMC as both have produced it at 7 nm. However, the Korean company is still behind TSMC in terms of technology when it only started to outsource when the memory chip sales go down from 2018. Besides, Samsung is also directly involved in too many markets. , can compete with their own partners.

“Samsung may also want to process chips for Apple, but currently the list of parts they supply to the iPhone is too much,” said Brett Simpson analyst at Arete Research. Meanwhile, TSMC always affirms its motto to never compete with its customers.

“Beliefs are formed over many years, not as simply as a piece of paper,” said Mark Li, an analyst at Sanford C. Bernstein.

The semiconductor market with high barriers in technology, belief will soon become a battlefield where “the winner has everything”, according to Credit Suisse analyst Randy Abrams and Haas Liu. TSMC is at the top, and that is why they become the target.

“If GlobalFoundries wins the lawsuit against TSMC, other high-tech outsourcing companies will become next targets,” said Dan Hutcheson, CEO of VLSI Research.

Source : Zing