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TSMC’s dominance poses risks to the global economy
- haspoken 5y agohttps://archive.is/gccon https://archive.is/gccon
- JosephK 5y agoLegend. Thanks.
- _carbyau_ 5y agoWhile the world wouldn't grind to a complete halt without Taiwan, they are a (the?) major player in high end chips. While not 100% watching it I feel as though China<-->US relations have whole strategies around Taiwan. Of course, if war over Taiwan breaks out, I plan to hit up my local computer shop, preferably within the hour.
- christkv 5y agoThe only other players are Samsung and Intel at this point I think.
- kmonsen 5y agoI think if there is a U.S. China war over Taiwan we have larger issues.
- baybal2 5y ago> Of course, if war over Taiwan breaks out, I plan to hit up my local computer shop, preferably within the hour. You will hit up your local draft station instead. Even if an immediate retaliation would not not happen, it will within years.
- throwaway4good 5y agoChina will not attempt to invade Taiwan (at least not now). But the threat of invasion will be continued to played up in US politics in order to support increased military spending and aggressive industrial policies towards US allies (in particular Taiwan but also South Korea).
- thecopy 5y agoIf Xi considers unification to be his legacy, there is a high risk of invasion.
- shadofx 5y agoJapan, South Korea, Taiwan, Isreal. The US reliably puts its money in places that are under threat. That's not something a profit - driven free market would normally do. It is US setting the geopolitical stage.
- ksec 5y agoHere is another headline, The world relies on two chip marker in South Korea for NAND and DRAM, leaving Everyone Vulnerable. Although arguably NAND and DRAM are commodities, and US already has a back up strategy ( Micron ).
- Archio 5y agoArguably as well, South Korea is underneath significantly less geopolitical threat than Taiwan.
- dkjaudyeqooe 5y agoThat depends on how crazy the current leader of North Korea feels at any moment, given the huge standing army it has, as well as the nukes.
- epberry 5y agoSouth Korea is not 100 miles from China and has a massive US military presence. This article is about the very real danger that China invades Taiwan - which it has already stated it wants to do (in case the military flyovers were not convincing) - and cuts off the world from the best silicon.
- Koiwai 5y agoI don't want to argue if China will "invade" Taiwan. But what make you think China will "cut off the world" IF that happens? That's not how this works, that's not how any of this works.
- brazzy 5y agoNo, they wouldn't deliberately stop selling the product of intact, fully staffed fabs after gaining control of them. But we're not talking about a corporate takeover. We're talking about a naval invasion of a very densely populated and well defended island. That might involve heavy artillery bombardment and prolonged urban combat, maybe a guerilla war and sabotage actions. There is no guarantee that the fabs are still operational after all that.
- helsinkiandrew 5y agoIt's interesting to think about what the solutions to this problem are. The advantages of buying from TSMC are presumably they have a lead in both technology and cost that will make your product better and cheaper. The disadvantages are that in natural disaster or war/military event the chips won't be available and you'll have difficulty shipping your products. It's very hard for a company to take the latter seriously (like the supply chain issues that arose due to covid) when it is a very rare event that will likely have other large effects on your market and your competitors also. Governments stepping in to subsidise/force use of other companies will likely reduce the short term profitability or commercial appeal of your product.
- qwerty456127 5y agoThe solution is to stop playing the bullshit game of Taiwan non-recognition, give it a seat in the UN and protect it.
- colinb 5y agoCan a place be recognized as a country by the UN if a Security Council member vetos?
- qwerty456127 5y agoPerhaps, if all the rest of the security council members and other countrises recognize it individually. You can veto a UN decision but not a sovereign country decision.
- kabouseng 5y agoThere is no way Russia will join other countries in such a UN recognition of Taiwan, as it will open a very nasty door for them regarding the Crimea... So 2 of the 5 permanent members of the UN is already not going to do this. And it is not only limited to non-western countries, the same argument holds for Spain with Catalonia for instance. Real-politik is complicated.
- 5y ago
- dlsa 5y agoTSMC are a critical piece of the world's infrastructure. The fact that car makers are grinding to a slowdown and for particular assemblies, a complete halt, is very telling. The automakers themselves now fully appreciate just how critical TSMC really are. If they weren't critical, then they'd already have an alternate supply ready right now. But they don't. Its TSMC being pressured to increase production capacity, not an eager competitor taking up the slack. They wouldn't be furloughing employees otherwise. The Germans and many others wouldn't be sending letters to Taiwan requesting higher production. So TSMC is critical. Does this mean there are absolutely no alternatives? Likely not, but TSMC are essentially the only game in town. At scale. At quality. With a useful track record of known production characteristics.
- consp 5y agoThe stuff car makers buy doesn't solely rely on TSMC and can also be produced by GloFo or Samsung or maybe even other smaller fabs. No everything needs bleeding edge. It's a more general trend.
- Koiwai 5y ago"is a critical piece of ...", yeah, so are oil drilling, and proxy war, and many other things.
- thereddaikon 5y agoTSMC isn't the only one, there are still a few big players in the semiconductor fab market. The problem is its an extremely inelastic industry. Creating a new foundry is a very slow and expensive process. If you had predicted this and starting building one in 2019 to take advantage of the demand you still wouldn't be in business yet. The combination of it being a very specialized and expensive industry with high upfront costs, extremely high RnD, cut throat competition and patent landmines means that as time has gone on ther have been fewer and fewer players. The only ones really capable of filling orders for chips using process tech from the last 5 or so years would be TSMC, Samsung, Global Foundries and Intel. Intel just recently opened up to third party production so they wont have an effect on the global supply for awhile.
- 5y ago
- fxtentacle 5y agoWhy is news like this not driving the stock price up? I mean to me this sounds as if TSMC could easily raise prices and increase profits and their customers will still buy the exact same amount... Because they have to.
- riffraff 5y agoThe risk TSMC faces is that competitors will bring up new capacity and deal with improved performance, the stock projects the value of profit "forever" not just for the next couple years.
- vmception 5y ago(Inaccurately projects) Nothing is “priced in” and prices really highly on historical volatility One way to tell is to look at how nearer term options are priced than LEAPS are. LEAP pricing is telling you nobody knows a damn thing and they are consistently undervalued.
- fractallyte 5y agoReminds me of Asimov's "Foundation" (https://en.wikipedia.org/wiki/Foundation_series https://en.wikipedia.org/wiki/Foundation_series). The (first) Foundation was set up on a small, insignificant planet, surrounded by belligerent powers. Its continued existence was made possible only by playing those powers off against one another. And the Foundation itself: highly advanced technology that those very powers came to rely on...
- LatteLazy 5y agoI wonder if China will invade. If the last few years have told us anything, it's that China can do whatever it likes. The rest of the international community is fractured like never before. There may never be a better time, if and only if China can get it done quickly and reliably. Xi (Winne the Pooh) is in a strong place to do it politically.
- zero_deg_kevin 5y agoI suspect China is overestimating the strength of their hand. Their economy is dependent on foreign corporations voluntarily choosing to manufacture there. If they start acting like a third-world kleptostate, they'll be branded as unreliable business partners and have to go back to sorting trash.
- LatteLazy 5y ago>corporations voluntarily choosing to manufacture there I'm not sure how true that is anymore. Companies trying to manufacture elsewhere have to cope with 101 issues that increase costs. Everything from JIT logistics not working to lack or workers to uncooperative governments. China is getting more expensive and some low skill work is going elsewhere. But for most companies, setting up elsewhere means prices much higher than the market will tolerate.
- akban 5y agoChina has the 2nd largest (and according to some sources, probably the largest) consumer market on Earth, and is currently, by a large margin, the largest market for Cars, Smartphones, PCs, Fashion, and a host of other product categories. In 2020, China was the only major country where global corporations didn't see a significant decline in sales growth. China is also, again by far, the largest e-commerce market and the largest mobile payments market on Earth. I apologize for sounding like an infomercial, but these are basic economic facts that one would expect a reasonably well-read individual to be aware of. I would advise that in future you get better informed before coming here to advertise your ignorance.
- greenforer 5y agoBeen thinking about this for a few weeks. Taiwan is profiting immensely from semiconductors, that means demand for semiconductors is very high. This was also the case before 2020. So, manufacturing semiconductors is profitable. It is clear to me that if semiconductor production was doubled overnight, many new industries making use of the newly available cheap chips could arise and bring innovation. Why only Taiwan? Those factories are very expensive. Think of what Taiwan has to offer so that we can compare the rest of the world: - Access to sea - 20% corporate tax - (comparatively) sober, stable politics. The rules don't change much. Then I thought about where I would build one, given this profitable circumstances: 1. Cannot be in (most) of Europe, due to high taxes and advanced and advancing work regulations. Standards are too strict to allow for innovation. Most of low tax Europe are tax heavens unsuitable for high scale industries. Estonia and Georgia give some breathing room, but are friendlier to services. 2. I cannot build it in Africa: high taxes, extreme corruption and high risk of politics affecting the company. 3. I might be able to build it in the US. Being close to the client is not as important as having access to sea. US politics are turbulent and if corporate tax is raised, then there's no competition to be made. 4. South America is a bag. Almost all SA countries have corrupt governments at every layer, but there are a few business friendly ones. Most countries cannot be considered. Panama is already focusing in other things, Uruguay (25% corporate) and Brazil (~34%) cannot compete. 5. I'm unsure about Middle East, I don't see anything there 6. Asia is massive: 6.a. China could happen. 6.b. South East Asia is too erratic compared to Taiwan, investors will go to Taiwan instead, or invest in something else. Singapore is too small. 6.c. Japan is an stagnant economy and there is too much bureaucracy and regulation involved. 7. Australia ~26% corporate tax rate is not going to make the cut. I'm not knowledgeable about regulations. I probably have missed something, I tried to put onto words my thinking process on why Taiwan might still be the most profitable place to make these industries. The whole world is in the middle of a shortage of this material, yet alternatives to Taiwan don't seem to arise.
- nicoburns 5y agoIf it's so profitable, why can't you take the hit on the higher tax rate?
- 5y ago
- Koiwai 5y agoI believe this is some political campaign to get financial support for certain endeavors.
- ZoomerCretin 5y ago“Taiwan invested a hundred billion dollars into semiconductor R&D. To remain competitive and guard our national security interests, we also require investment in the same scale, from which we would profit handsomely.”
- qwerty456127 5y agoBy the way, does the mainland China have the technologies to produce the chips Taiwan does too?
- Koiwai 5y agoKeyword: SMIC TLDR: not there, at least yet.
- robgibbons 5y agoNot at the level that TSMC does. TSMC gets their lithographic machines from ASML, which leads the industry by a large margin. So far, China has not been able to acquire its most cutting-edge machines. They are currently relegated to using older fab generations.
- qwerty456127 5y agoAmong the rest this means mainald China also depends on importing Taiwan-produced chips (and probably wouldn't want to disrupt their supply) doesn't it?
- Proven 5y agoIt doesn't. They are building capacity elsewhere and they have competitors. The CCP does.
- jimmont 5y agoTSMC is in the process of installing foundries in both the US and Japan. Imagine where we'd be if they weren't in existence. And how many decades they've been doing their thing. What a stupid assertion around risk. The WSJ should do an article about how the fact that most bicycles are manufactured in Taiwan poses global a risk to public health and transport (or whatever you fit in the blank).