4 ms·

I hate economics and know nothing really, but those numbers are the highest margins I have ever seen ? Aren't they profitable because they are in a unique posi

by sandos 4y ago

I hate economics and know nothing really, but those numbers are the highest margins I have ever seen ? Aren't they profitable because they are in a unique position? I would hope they keep being profitable. What happens if they would fail?

manuelabeledo 4y ago
> those numbers are the highest margins I have ever seen ? It’s not unusual to see 70%+ margins in software products.
- mousetree 4y ago
  TSMC don't sell software products
  - selykg 4y ago
    They weren't implying that, see the quote they included. OP said they hadn't seen profit margins this high, and the reply indicates that it's not uncommon to see software even higher. It's just a useful tidbit, related to the point they specifically quoted.
    - mousetree 4y ago
      Perhaps I misread it. My reading was that it's not uncommon to see such high margins given that this is a software product.
  - breck 4y ago
    Though perhaps you could say they sell derivatives of software products? I'm assuming they write the best custom chip design software and that's their biggest competitive advantage (and then operational excellence and savvy business maneuvering et cetera). Though I know nothing about them just guessing as an outsider.
    - bismuthcrystal 4y ago
      Pointless argument. At present time you could argue it for every company in the world. Boeing? Sells derivatives of CAD software, not airplanes.
    - chrsw 4y ago
      TSMC doesn't really write chip design software. Maybe they do at some small level but that's not their bread and butter. TSMC provides IP engineers need to design chips to be built by TSMC. That IP is used by CAD tools from major players like Cadence, Synopsys and Mentor (now Siemens, I guess). TSMC's advantage is their superior chip fabrication technology and ability to scale.
      - breck 4y ago
        Got it. TSMC provides an Internal Protocol that others can use to get chips built. An API for physical world. Interesting. Thank you!
spywaregorilla 4y ago
> What happens if they would fail? Meaning what? The factory gets destroyed? A competitor appears? Labor costs rise? Demand falls? So long as the world economy is dependent on the TSMC, a CCP invasion seems unlikely if that's what you mean. The profitability isn't the clearest way to measure that. It could fall for a number of reasons without the geopolitical context changing.
abudabi123 4y ago
Should TSMC fail due to one of the causal factors being geotech political interference on the horizon from the clash of China's Communist Party and the U.S. Wario Blob mic you would think ASML has wargamed plans to supply demand.
ksec 4y ago
You will also need to look at R&D spend and CapEx. Those profits are funnelled back to that. Basically it is a whole cycle, in order for fat profit margin you need to be at the leading edge in Tech, Yield and Volume. And all three of those requires R&D and CapEx. So you need Fat Profits margin to sustain it.

by sandos 4y ago

manuelabeledo 4y ago

> those numbers are the highest margins I have ever seen ? It’s not unusual to see 70%+ margins in software products.

mousetree 4y ago
TSMC don't sell software products
- selykg 4y ago
  They weren't implying that, see the quote they included. OP said they hadn't seen profit margins this high, and the reply indicates that it's not uncommon to see software even higher. It's just a useful tidbit, related to the point they specifically quoted.
  - mousetree 4y ago
    Perhaps I misread it. My reading was that it's not uncommon to see such high margins given that this is a software product.
- breck 4y ago
  Though perhaps you could say they sell derivatives of software products? I'm assuming they write the best custom chip design software and that's their biggest competitive advantage (and then operational excellence and savvy business maneuvering et cetera). Though I know nothing about them just guessing as an outsider.
  - bismuthcrystal 4y ago
    Pointless argument. At present time you could argue it for every company in the world. Boeing? Sells derivatives of CAD software, not airplanes.
  - chrsw 4y ago
    TSMC doesn't really write chip design software. Maybe they do at some small level but that's not their bread and butter. TSMC provides IP engineers need to design chips to be built by TSMC. That IP is used by CAD tools from major players like Cadence, Synopsys and Mentor (now Siemens, I guess). TSMC's advantage is their superior chip fabrication technology and ability to scale.
    - breck 4y ago
      Got it. TSMC provides an Internal Protocol that others can use to get chips built. An API for physical world. Interesting. Thank you!

spywaregorilla 4y ago

> What happens if they would fail? Meaning what? The factory gets destroyed? A competitor appears? Labor costs rise? Demand falls? So long as the world economy is dependent on the TSMC, a CCP invasion seems unlikely if that's what you mean. The profitability isn't the clearest way to measure that. It could fall for a number of reasons without the geopolitical context changing.

abudabi123 4y ago

Should TSMC fail due to one of the causal factors being geotech political interference on the horizon from the clash of China's Communist Party and the U.S. Wario Blob mic you would think ASML has wargamed plans to supply demand.

ksec 4y ago

You will also need to look at R&D spend and CapEx. Those profits are funnelled back to that. Basically it is a whole cycle, in order for fat profit margin you need to be at the leading edge in Tech, Yield and Volume. And all three of those requires R&D and CapEx. So you need Fat Profits margin to sustain it.