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TSMC 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

by dlsa 5y ago

TSMC 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 ago
The 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 ago
TSMC 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.
- JohnBooty 5y ago
  The combination of it being a very specialized and expensive industry with high upfront costs, extremely high RnD, cut throat competition and patent landmine What prevents (companies in) Western nations from creating their own fabs on their own home soil? Obviously, labor costs are much lower elsewhere. But the massive capital expenditures involved mean that labor is a comparatively much lower % of overall costs compared to, say, spinning up a factory to make cheap shirts. I wonder if Western nations/companies will be spurred by this chip shortage to start prioritizing their own foundries. Like energy independence, except... silicon independence.
  - thereddaikon 5y ago
    They have and are. Intel has major fabs in the US but until recently didn't sell foundry services. Global Foundries has fabs in the US, Germany and various other places. Samsung of course has its fabs in Korea. There are more fabs elsewhere that aren't on the absolute cutting edge. The problem isn't that TSMC is the only fab. Its that semiconductor fabrication is inelastic, in other words it cant respond quickly to changing demand. The lead time to start producing a given chip design is fairly long and a fab like TSMC will have its available capacity contracted out in advance. They were already running at capacity before COVID because their 7nm process was very popular. You cant just build a fab overnight and start producing chips. Just building the place and getting the appropriate equipment installed takes over a year and then there is a lead time for adapting the chip design to your process. You actually design your chips with the proprietary fab process in mind. So if you had contracted with TSMC but they cant fill your order and you have to move to one of the newly available Intel fabs your engineers must adapt your design before you can start producing again. Every step of this process takes time that means that no reaction due to COVID would be showing results yet. There will be a shortage for the foreseeable future.

by dlsa 5y ago

consp 5y ago

The 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 ago

TSMC 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.

JohnBooty 5y ago
The combination of it being a very specialized and expensive industry with high upfront costs, extremely high RnD, cut throat competition and patent landmine What prevents (companies in) Western nations from creating their own fabs on their own home soil? Obviously, labor costs are much lower elsewhere. But the massive capital expenditures involved mean that labor is a comparatively much lower % of overall costs compared to, say, spinning up a factory to make cheap shirts. I wonder if Western nations/companies will be spurred by this chip shortage to start prioritizing their own foundries. Like energy independence, except... silicon independence.
- thereddaikon 5y ago
  They have and are. Intel has major fabs in the US but until recently didn't sell foundry services. Global Foundries has fabs in the US, Germany and various other places. Samsung of course has its fabs in Korea. There are more fabs elsewhere that aren't on the absolute cutting edge. The problem isn't that TSMC is the only fab. Its that semiconductor fabrication is inelastic, in other words it cant respond quickly to changing demand. The lead time to start producing a given chip design is fairly long and a fab like TSMC will have its available capacity contracted out in advance. They were already running at capacity before COVID because their 7nm process was very popular. You cant just build a fab overnight and start producing chips. Just building the place and getting the appropriate equipment installed takes over a year and then there is a lead time for adapting the chip design to your process. You actually design your chips with the proprietary fab process in mind. So if you had contracted with TSMC but they cant fill your order and you have to move to one of the newly available Intel fabs your engineers must adapt your design before you can start producing again. Every step of this process takes time that means that no reaction due to COVID would be showing results yet. There will be a shortage for the foreseeable future.