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Chipmaker TSMC pushes global expansion as supply chain battle heats up
Insights from The Washington Post, Foreign Policy, and Ars Technica
The News
Taiwan Semiconductor Manufacturing Co. – the world’s largest chipmaker – outlined global expansion plans and struck a bullish note on future demand, even as it posted a 19% fall in net profit owing to customers’ pandemic-era inventory backlogs.
TSMC, which makes chips used in artificial intelligence applications as well as consumer electronics and smartphones, said it would open its first facility in Japan, begin construction on one in Germany and expand sites in Arizona and Taiwan.
The chipmaker said the outlook looks brighter for 2024, boosted by AI-led demand, with the company expecting revenues to grow by up to 25%. Across the industry, chip sales increased in November for the first time in more than a year and the smartphone market started to grow again in the last quarter of 2023.
SIGNALS
TSMC finds itself at the heart of a geopolitical battle over chips
TSMC – which produces roughly 90% of the world’s advanced chips, a key component of electronics from iPhones to fighter jets and AI – now finds itself in a geopolitical battle over semiconductor supply chains. For Taiwan, which Chinese leaders consider a breakaway province, TSMC’s dominance over the global chip supply has granted the island what many call a ”silicon shield" — a reason for Beijing not to risk a costly invasion and an economic motivation for the U.S. to continue supporting Taipei. Yet as U.S.-aligned countries seek to bring Taiwanese chipmaking expertise to their own shores to prevent future supply chain shocks, Taiwan’s leaders are growing increasingly anxious that TSMC’s overseas expansion may weaken Taiwan’s security, Foreign Policy reported last year.
Drive to develop US chip industry stumbles forwards
TSMC’s overseas business has not gone swimmingly, with delays announced on Thursday at one of the two semiconductor factories it is building in Arizona, a key part of the U.S.’ plan to become a key player in the chip industry by the end of the decade.
TSMC’s chairman also cast doubts on an earlier commitment to produce advanced 3-nanometer chips at one of the Arizona production plants and construction has been fraught with repeated delays as the chipmaker has struggled to adapt to the United States’ culture and labor force, the Financial Times reported. While the Biden administration is throwing hundreds of millions of dollars at domestic semiconductor companies, the U.S. still lacks plans to reproduce key steps in the supply chain — such as chip packaging — domestically. “We are somewhere between a decade and two decades away from supply chain independence,” Jensen Huang, the CEO of U.S. chipmaker Nvidia, said in Nov. 2023.
Taiwan election concerns ease as president-elect pushes ahead with chips
Shares in the Taiwanese company still lag behind their competitors’, dragged down by concerns over how China would respond to Taiwan’s recent presidential election, Bloomberg reported – but the new president-elect has moved to reassure investors. While the election was won by Lai Ching-te – whom Beijing considers a separatist – Taiwanese officials have said they do not expect a significant show of force by China, despite Beijing launching military maneuvers around Taiwan in the wake of the poll. Lai has said he supports TSMC’s decision to expand overseas, and analysts do not expect the election to have a major impact on the company. “Lai’s victory suggests a continuation of Taiwan government’s semiconductor-focused economic growth strategy,” a Bloomberg Intelligence analyst said.
