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It seems to be that than TSMC needs to increase their prices. They should be extracting more margin when compared to AMD, NVDA etc. They are just killing it. On
by samfisher83 6y ago
It seems to be that than TSMC needs to increase their prices. They should be extracting more margin when compared to AMD, NVDA etc. They are just killing it. One of the main reasons with intc had better chips was they had the best Fabs.
Its kind of sad we used have guys like shockley, moore, kilby etc. The reason why silicon valley is called silicon valley. Now we are just falling behind Taiwan, south korea, and maybe china.
- AgloeDreams 6y agoKeep in mind that TSMC also gains a position where they are the only superpower in fabs. They can duplicate the N5 fab and sell at any price they want. Apple pays R&D. Imagine a world where someone up-front pays your R&D, pre-pays batches at a profit for you, and lets you sell to anyone else while making you the best in the world. They gain basically more than Apple does from this.
- baybal2 6y ago> It seems to be that than TSMC needs to increase their prices. They should be extracting more margin when compared to AMD, NVDA etc. They are just killing it. One of the main reasons with intc had better chips was they had the best Fabs. TSMC margin was always at around 30%, they are killing it.
- londons_explore 6y agoBut if you are the only company in the world that can produce chips good enough for iPhone CPU's, you could have 600% margins and Apple would still buy from you rather than let someone else take the crown of fastest smartphone...
- baybal2 6y agoThey can, but they don't
- mschuster91 6y ago> and Apple would still buy from you rather than let someone else take the crown of fastest smartphone... ... and invest in making their own chips from end to end in a couple of years. Apple has proven that they do not hesitate to completely take over stuff with the recent Intel-ARM switch when the quality or price does not match what they perceive to be fair. TSMC is in an extremely powerful but also very precarious position - they are worth ~400B $ in market cap, and Apple has ~200B $ in cash reserves and a market cap of 2T $. If Apple wants they can either buy up TSMC whole or they can set up a competitor.
- spirobel 6y agono they cant. The taiwanese government wouldnt let them buy it. also they cant set up a competitor because the kind of people that can pull this off is limited and they all work for TSMC. The prc government tried this for decades and they have infinite money. there is a good book about it called "hidden dragons paper tigers". Apple is not god :-)
- intev 6y agoApple is not god, but Apple is, more importantly, not the PRC. It would be significantly easier to lure top engineers to America, pay them multiples of what they currently earn and work for a prestigious company. The PRC has only one of the main motivating components.
- spirobel 6y agohave you ever been to Taiwan? I think moving to America from Taiwan is not a perk. Its the opposite of that. Also you can debate if TSMC or Apple is more prestigious.
- dvaun 6y agoI just searched for "hidden dragons paper tigers" and now I want to add it to my reading list. Thank you for the reference!
- Malician 6y ago
- enragedcacti 6y agoOr they realize that at any point they have low-N years before Samsung, GloFo, etc. could catch up with investments from AMD, Nvidia, Apple, etc. so it behooves them not to gouge to the point that those investments make financial sense for those companies. TSMC might just be a couple billion dollar investments away from becoming a commodity again.
- jjoonathan 6y agoExactly. TSMC's competition is down but not out. TSMC gets more market power by starving their competition than by putting cash in the bank.
- jmisavage 6y agoI wouldn't count on GloFo being a leader in process tech. August of 2018 they announced they suspended work on their 7nm, 5nm and 3nm processes. It looks like they're focusing more on being a follower. This has also forced AMD to compete with Apple and others for the best 7nm that TSMC can offer. Intel is lucky that AMD can't meet demand.
- monocasa 6y agoThe slowing of Moore's law means that they have the option to wait and see, bank up capital, and then jump back in when everyone else has done the hard work for them of figuring out EUV.
- jjoonathan 6y agoGloFo is sinking because TSMC aggressively courted AMD. In an alternate universe where TSMC was content to sit back and extract margin, GloFo would still be in the running. Even if TSMC decided tomorrow to sit back and extract margin, GloFo could still probably get back in the game. That ability decays with time, of course, and that decay is what TSMC buys with their low margins. They are suffocating their competition to build a moat. It's a much better strategy than "extract margin and make big bets on fancy new tech to stay one node ahead," with Intel as Exhibit A.
- deleted 6y ago[deleted]
- MangoCoffee 6y agowhy you want to risk your loyal customer's trust for short term profit?
- qzw 6y agoMaybe OP works in private equity.
- newsclues 6y agoAnd convince Apple to build a fab?
- burnte 6y agoExactly. Apple could build a fab and expend a few percent of their cache of cash.
- newsclues 6y agoI think Taiwanese engineers rather work for Apple in the USA than for the State owned companies in mainland China. They have the money and can attract the talent
- radicaldreamer 6y agoTSMC is already a major Apple partner, Apple had no reason to start a talent war here. Remember, Apple squeezes suppliers and labor (wage fixing from the Steve Jobs days). They only build their own stuff when they see a competitive advantage to doing so — when IBM stopped delivering on chip efficiency or when Intel’s chips started stagnating.
- baybal2 6y agoTSMC is known to be very selective with cadres. People who are given "keys to the kingdom" are selected among all things upon loyalty. Take a look on their number of GMs, and VPs with 10+ years of work at TSMC. At the highest levels, TSMC kind of stops being a company, and starts looking like a fraternity.
- magicsmoke 6y agoIf money's all that's needed to build a fab to match TSMC's 5 nm without prior experience then their biggest competitor would be China's SMIC. They have unlimited funding from the Chinese government because an embargo hurts China's electronics industry a lot more than just price gouging. SMIC, a company with unlimited funding to poach TSMC engineers and actual experience with chip fabrication is still 2 gens behind. Apple's not going to do any better.
- BurningFrog 6y agoApple might buy, but they'd have to raise phone prices, and the public would end up buying less.
- bradstewart 6y agoNobody in the semiconductor industry will put up with anyone in the supply chain making a 600% margin. Large Nvidia chips might not be able to move quickly, but all of the MCU, WiFi, etc chips would migrate to cheaper fabs like SMIC. Which reduces TSMC's revenue, which reduces their ability to invest in new processes. Cents (and even fractions of cents) matter to those chips.
- AgloeDreams 6y agoApple is paying better margins than that. Apple funds R&D of new processes for TSMC. If you put a 600% markup on that, apple might just go build their own fab and put you out of business.
- Nasrudith 6y agoHigher extraction margin also means it is more worth DYI which creates another competitor long term. It is sort of an auction for the leading one. "Only one able to produce them at the same cost/with this delay." Change the cost and others may run their numbers and decide. "Get our rivals and backers on the phone and see if they are willing to fund a shared fab - together we can probably reduce our expenses fifty percent long term but we can't afford it on our own."
- gzu 6y agoTSMC is the center of the universe for chip fab. AMD, NVidia, Qualcomm, and Apple all rely on their manufacturing. Doesn't this create a systemic risk especially with Taiwan's ties to China?
- zucker42 6y agoTSMC just stopped making chips for one of its biggest customers just because the U.S. passed a law. They're building a big facility in Arizona just to satisfy the economic nationalists in the U.S. Plus, Samsung is also outside of China, and while their technology is behind TSMC, they are fairly competitive. I don't think any ties Taiwan has with China are very worrying in this case. TSMC's ties with the U.S. are, on the other hand, a big strategic threat to China, and maybe to other countries that aren't the U.S.
- magicsmoke 6y agoSamsung has just as many ties with the US as TSMC. Both companies use semiconductor manufacturing equipment from US firms like Applied Materials and KLA. The reinterpretation of US export controls that bars TSMC from selling to Huawei extends from not just barring companies from selling products to China with US technology inside, but also barring companies from using US technology to manufacture Chinese-designed products that are then sold to China. This applies to Samsung just as much as TSMC. TSMC isn't real bottleneck here. It's US semiconductor manufacturing equipment firms fully under US jurisdiction that underpin the supply chain for any modern fab.
- caycep 6y agothis area of industry is perhaps the most interesting- the firms doing research and at the forefront of chipmanufacture, but in the lay tech press doesn't get a lot of fanfare. Are there good links to write-ups about how this industry is structured, etc? The only other company I know about is ASML who makes the EUV lithography machines...
- Malician 6y ago
- deleted 6y ago[deleted]
- x87678r 6y agoThe bay area should be renamed Social Media Valley. Hardly anyone there cares about fabs.
- rrss 6y agocompanies headquartered in Santa Clara Valley that care about fabs: Intel, AMD, Nvidia, Lam Research, Applied Materials, KLA, GlobalFoundries, Broadcom, Apple, Xilinx, Maxim Integrated (now part of Analog Devices), Linear Technology (now part of Analog Devices), Marvell, Cisco, Cypress, Google, Cadence, Synopsys, Western Digital, Seagate.
- ssivark 6y agoYes, but compare their combined market capitalization (of course, excepting Apple/Google) to any one or two of FAAMNG :-)
- rrss 6y agoIf a substantial fraction of the semiconductor industry (IDM + fabless + fab suppliers) is in Silicon Valley, then the name still makes sense even if there is a lot of other money floating around the area. also, why would this make sense: > of course, excepting Apple Apple is probably the single largest customer of TSMC, and their products depend on their semiconductor design team (especially true now that they are moving to in-house CPUs for laptop/desktop). Why throw them out from a discussion of companies that care about fabs?
- ssivark 6y agoIf one asked the question of which location in the US the semiconductor industry has the highest footprint in, the answer would definitely be the Bay Area (maybe California, to include San Diego, etc). But if you ask the question of which sectors the Bay Area has the largest investment and footprint in, then semiconductors would (unfortunately) be only a small part of that. That uncomfortable truth (which is exactly what I'm trying to point out in the above comment) is that market valuations today seem to be driven by the things built on top (in particular, the "data economy" and the effectiveness of personalization-driven consumption increases), rather than (for eg.) the semiconductor engg which is crucial to build those platforms. An analogue of this is when the Ford CEO speculated in 2018 to the effect that it might be more profitable to sell customer data derived by selling cars, than from selling cars in the first place.
- MangoCoffee 6y agoi've read an old article that talk about how much TSMC made from Apple. its about $10 per chip. i believed TSMC make their money from volume.
- monocasa 6y agoConsidering that Apple buys a lot of different chips from TSMC of radically different areas, that might be a questionable metric. They might average out to $10 a chip if you consider the chips in airpods and the application processors equally as each one chip. What'd be more interesting would be cost per square mm of silicon.
- AgloeDreams 6y agoAt > 100 million chips per quarter. ;) These are insane numbers.
- nabla9 6y agoLarge volume manufacturing deals are negotiated sometimes years before, TSMC had no idea how much demand there was or how badly Intel fails when AMD, NVDA and Apple bought the capacity. New GIGAFAB takes time to build.
- IanCutress 6y agoFrom breaking ground, about 20 months according to TSMC for Fab18 to build and install. Then another 9 or so to HVM
- edge17 6y agoSpecialization is a feature of global trade. Regions focus on specific industries to gain expertise and increase efficiency. Specializations change over time. The US, specifically Silicon Valley, has different specializations today than it did in the 60's. A lot of the semiconductor specialization moved overseas, costs came down, and in general the world is richer. Other specializations include things like China and injection molding, Japan and mechatronic technologies in the 80's and 90's, Thailand and lenses, etc Obviously the protectionist crowd would take issue with all this, but free trade theory is studied and applied all over in trade agreements, specialization zones (like Shenzen), etc. Generally speaking though, the cost of attempting to be self sufficient in everything (like semiconductor manufacturing) means closing borders to competitors outside, which eventually leads to inferior product. With robust competition, the consumer usually wins on both quality and price. Obviously there are other consequences, such as job migration etc. In general though, everyone is lifted up and made richer over time (evident by the fact that there is quantitatively less poverty in the world today and the 1960's and even the most poor can enjoy things like cellphones, leather jackets, and shoes that fit well that even the kings of a century ago could not). The system isn't perfect, but atleast in my eyes it is the one that does the most good for the most people.
- rbanffy 6y ago> Obviously there are other consequences, such as job migration This is an interesting issue. The existence of national borders and the restriction on the free movement of people reduces the efficiencies achieved with specialization. Imagine how more efficient it'd be if Taiwan had easy access to US semiconductor talent. Similarly, it'd be more efficient if the seasonal migrations that help agriculture didn't happen and those people actually lived near the crops they help maintain.
- cerebellum42 6y ago>Similarly, it'd be more efficient if the seasonal migrations that help agriculture didn't happen and those people actually lived near the crops they help maintain. I mean it's more complicated than that, most seasonal migrations of agriculture workers happen in large part because the seasonal workers come from areas with lower standards of living and lower cost of living. Partially, they are attractive as workers because they are able to take lower wages than the people who live where the crops are grown.
- kevin_thibedeau 6y ago> Now we are just falling behind Taiwan, south korea, and maybe china. A career path in microelectronics is suicide for US citizens. It's going the way of nuclear engineering.
- cdelsolar 6y agoreally? I switched to coding from EE but mostly because some good opportunities came up. I still miss EE and think it's awesome...
- kevin_thibedeau 6y agoMicroE is the sub-specialty that deals with IC production. EE has its own problems but there is far more opportunity than working in the shrinking number of fabs.
- QuixoticQuibit 6y agoI’m curious, what problems does EE have?
- kevin_thibedeau 6y agoMost electronic design work is done outside of the US so the opportunities are still limited. You can become trapped in a job or unemployable if you have specialized in something that isn't in demand. Most regions have few concentrations of employers that you can shift between so changing jobs usually means moving. The economic realities of making things and the limited labor competition suppresses salaries.
- andromeduck 6y agoTSMC is like Taiwan's Aramco in that it's economic entanglements are the country's primary protection/leverage against regional neighbors. Profit is important but it's also about stability and survival.
- quotemstr 6y agoThere's an essential link between freedom, creativity, and innovation. Is it any wonder that as we've become an increasingly stifled society on an intellectual level that we've fallen further and further behind technologically?