10 ms·

TSMC Risk

167 points by swolpers 9mo ago

sylware 9mo ago
There are some near ready foundries in the US and in EU, not to mention South Korea. It would take a few years to catch up of course. What I worry more about is the full lock-in of TSMC production capacity by nvidia/apple/amd/etc for their chips on their latest and greatest silicon process (aka the best in the world). There is 'no space' for performant large RISC-V implementations or other alternative (and it will require several iterations and mistakes will be made)
- iszomer 9mo ago
  Tenstorrent managed to secure TSMC manufacturing capacity, I doubt many other RISC-centric fabless companies would have any issues aside from aggressive competition.
  - sylware 9mo ago
    I wonder when we will see RISC-V (rva23+) large implementations, for instance for performance "desktop" at 5GHz+ on latest silicon process... I know I can already replace my rpi3 with a linux supported out of the box RISC-V SOC board (aka, the enabling of assembly written software = no planned obsolescence from computer languages anymore, near 0-SDK).
- mrec 9mo ago
  Interesting point, although it's clearly not in TSMC's interest to land themselves in a monopsony situation by allowing Apple (e.g.) to squeeze all their competitors out of the market.
- christkv 9mo ago
  Im the EU there is Intel Ireland at least.
DivingForGold 9mo ago
"AI has a physical dependency in Taiwan that can be easily destroyed by Chinese missiles, even without an invasion" ? Arguably false. Why do you think the US has encouraged TSMC foundries, now inside Arizona ? It's obviously to protect against the scenario that China takes Taiwan. In that case, give it 6 months or less for US TSMC foundries to produce the finest. China taking Taiwan will likely not result in the CCP getting any technology, certainly Taiwanese have "contingency plans" to vaporize all tech in the event they are invaded.
- showerst 9mo ago
  90% of TSMC's capacity is still in Taiwan. A substantial amount of global high end chip capacity is also in South Korea and Japan, which would likely get pulled in. A war would not wipe out chip production, but the squeeze would be immense for many years.
  - fc417fc802 9mo ago
    > A war would not wipe out chip production It probably wouldn't but it definitely could.
- palmotea 9mo ago
  That's over-optimistic. > Why do you think the US has encouraged TSMC foundries, now inside Arizona ? It's obviously to protect against the scenario that China takes Taiwan. In that case, give it 6 months or less for US TSMC foundries to produce the finest. American business culture works pretty strongly against "give it 6 months or less for US TSMC foundries to produce the finest." I think it's most likely those fabs will stagnate and the American MBAs running them will just milk them for short-term profits. Why invest in technology when you can buy back shares? After all, your only goal is number-go-up. > China taking Taiwan will likely not result in the CCP getting any technology, certainly Taiwanese have "contingency plans" to vaporize all tech in the event they are invaded. Not necessarily. Technology isn't so much the machines, it's the know-how. TMSC employees will still need jobs, post invasion, and I'm sure China will pay them very well. Some fraction will go to work for Chinese fabs, and teach them TMSC's tricks and knowledge.
buckle8017 9mo ago
> AI has a physical dependency in Taiwan that can be easily destroyed by Chinese missiles, even without an invasion Taiwan has missiles with the range and warheads to strike the three gorges dam. An attack by China would end very poorly for everybody. There are millions of people living in the inundation zone.
- fruitworks 9mo ago
  Could the chinese construct a sufficient anti-missle defence?
  - buckle8017 9mo ago
    Obviously the actual number of missiles Taiwan has is not public, but I suspect they have enough that reliably intercepting a full barrage is not something even the us could pull off.
    - wat10000 9mo ago
      The general calculus is that an interceptor costs as much as the missile it intercepts, so defenses are only effective against an adversary with much less resources. Hence Israel can defend against Hamas/Hezbollah, and the US can defend against North Korea, but Israel struggles against Iran and the US doesn't even try to defend against China/Russia. China obviously has a lot more resources than Taiwan, but then you have a concentration effect where an attacker can focus their resources on a single target, but a much more resourced defender can't necessarily afford to defend that target. We saw that play out with the UK's nuclear deterrent strategy in the cold war, where they focused on overwhelming Moscow's defenses, and were (probably) able to do it despite the USSR being so much bigger.
      - maxglute 9mo ago
        TW missiles can't "concentrate" because TW geography = all missile flight paths travels through boost, midcourse and terminal interceptors gauntlet along PRC easter theatre command which probably has the densest IADS in the world. PRC has like 3-4x more interceptors in eastern theater (8-12x more total) than TW has missiles. That's just land based, there's also 1000s of naval picket interceptors. Imagine if all of US patriot batteries in Florida, multiplied by 3, then asking what Cuba can do to saturate. Then add in USN DDGs and the answer is realistically nothing, because the industrial math is brutally lopsided. That's assuming TW gets to coordinate salvo their entire inventory, realistically most TELs would be glassed first, every part of TW is withing 5-7 min of PRC missiles and mlrs, less if fired from strait or loitering munitions, i.e. basically faster than abbreviated TEL setup cycle TW has for their tunnel to launch strike complex.
alephnerd 9mo ago
From a NatSec perspective, TSMC isn't really a bottleneck - most weapon systems use SoCs and microcontrollers that can be fabbed on "legacy nodes" (ie. 28/40/60/90nm) or 14/20/22nm nodes, and compound semiconductors. The ability to mass produce a Pascal or Volta comparable GPU or Apple A11 comparable SoC is all you need for more cutting edge systems. Power Electronics and Compound Semiconductors (GaN, SiC) have historically been the biggest bottleneck. The bigger risk for the TSMC-China aspect is TSMC's planned exit of GaN foundry production by 2027. Most Chinese manufacturers still depend on TSMC-produced GaNs wafers instead of domestically produced GaN vendors due to reliability concerns. China will probably end up matching TSMC's specs for compound semiconductors in 4-7 years, but that implies that the Sullivan Doctrine still holds and is a loss for China. Every other country with compound semiconductor production capabilities at scale (US, Germany, France, South Korea, Japan, Israel, Russia, India) either limits their exports or cannot export them to China without facing sanctions from other buyers (primarily Russia as India does not allowing commingling of SKUs for defense vendors who sell to Pakistan/China as well, and Russian vendors are members of India's EW and DEW program). If a US-China War was to arise, worst case we would probably see a mass reversion back to 2018-22 level technology, which isn't the end of the world. Additonally, the China-Taiwan situation is orthogonal to semiconductor dependency.
- joe_mamba 9mo ago
  >If a US-China War was to arise, worst case we would probably see a mass reversion back to 2018-22 level technology, which isn't the end of the world. It wouldn't be the end of the world if those 2018 chips came at 2018 prices and only impacted commodity stuff like phones, datacenters and laptops, but they'll be at 10x the 2018 price and impact critical stuff like automotive, the cars and trucks that gets your food delivered to the supermarket, and if those become impossible to buy or fix anymore, then your groceries will also get more expensive, triggering an end-of-the-world riot from taxpayers who can't afford food anymore. People need to view this issue as not just being stuck with 2018 laptops and phones which isn't that bad, but has much wider societal implications.
  - alephnerd 9mo ago
boxed 9mo ago
> Rather, the only thing that will truly motivate TSMC to take on more risk is competition. Maybe I missed something, but if Google, Microsoft, Apple, OpenAI, etc want more capex on fabs, they can front that money themselves?
- aurareturn 9mo ago
  Yes. I think the article missed it. In fact, I expect it to happen this year when Nvidia overtakes Apple as TSMC's biggest customer. It's going to start a wafer war in my opinion. Best way to secure wafer supply is to pre-pay.
kouteiheika 9mo ago
> Anthropic Chief Executive Officer Dario Amodei said selling advanced artificial intelligence chips to China is a blunder with “incredible national security implications” [...] “I think this is crazy. It’s a bit like selling nuclear weapons to North Korea.” This is all a smoke screen. He knows very well that China can and will develop their own hardware to train AI models (and in fact, they are successfully doing just that; e.g. the recently released GLM-Image was trained on their own silicon). His only objective here is to slow them down enough so that they don't eat Anthropic/Claude's lunch releasing open-weight models that are increasingly competitive. But he can't just openly say "hey, we don't like that they release open weight models for free", so he's engaging in the AI version of the "think of the children" argument. Anthropic's whole modus operandi was always pretty much "we should control this technology, no one else". It's not a coincidence they're the only major lab which has not released any open weight models, they don't publish any useful research (for training models) and they actively lobby the lawmakers to restrict people's access to open weight models. It's incredibly ironic that Dario is worried about (I quote) "1984 scenarios" while that's exactly what his company is aiming towards (e.g. giving Palantir access to those models is not "unsafe", but an average Joe having unrestricted local access is an immediate 1984-style dystopia).
- aurareturn 9mo ago
  Yes. Dario Amodei is just using "china bad" to stave off competition. I highly doubt he cares one bit about anything else except his own wallet and power.
- jononor 9mo ago
  This is likely. His concern is first and foremost the company. Geopolitics is primarily a potential tool in that capacity.
- Jyaif 9mo ago
  Another reason he wants fewer people buying AI chips is that less demands leads to smaller price, which would reduce the capex of his company.
CMay 9mo ago
The more complex the process becomes, the harder it is to have equivalent competition so you're bound to have issues where a single company's investment decisions have widespread impacts. My perspective on the China risk differs some, though. China wouldn't benefit much from attacking TSMC. This is the first time I've heard anyone suggest that they might. At best they'd like to have it in-tact if they do take Taiwan, but there have been talks about machines being rigged to explode to deny them from China, or the US striking them in that scenario. If neither we nor China get to work with TSMC, then we're still ahead in relative terms. If China did attack TSMC, they set the norm that the fabs (including their own) are now a fair target which would be a larger disadvantage for them than it would be for us since China's physical power projection remains pretty regional outside of Chinese nationals abroad engaging in sabotage. That is one of their biggest weaknesses. Yes they have a lot of manufacturing capacity and a large population with many talented people, but in a way we have lent them the power to scale up to see what they'll do. We are already putting some pressure on that scale now that they've shown who they are, but if it came to war it would be very doable to start reversing their scale and their capacity to do the same to us would degrade as ours increases. Even if all the AI in the world was destroyed, that's how it would play out. The problem is that Taiwan remains in close proximity to China so similar to Ukraine it would likely come down to how long they're willing to throw everything at it. If Russia and China wanted to be powerful, it's just idiocy to show the existing superpower that you cannot be trusted with the power you have. If they fancy a merit based society, they forgot that merit isn't omnipotence and you still need the right ideas to be at the top to accompany the merit. For China maybe they need AI for that alone, but western societies at least have ways for the right ideas to make it to the top without the strict need of AI.
- nebula8804 9mo ago
  The US has shown that it can't handle any level of discomfort. The reason Trump is back in the white house is because grocery prices went up a little bit. Can you imagine the failure of the tech companies that are propping up the entire economy? That would happen under a Taiwan invasion scenario. China has a much high pain tolerance than US citizens at least. I'd argue they would outlast the US. Would they outlast the US military? I don't know. But it may not matter as given enough pain the US population will make itself heard.
throwaway63253 9mo ago
Honest question, from non-american: what is up with all the China scare? I just can't understand it. Is it because China is socialist and we want to see capitalism winning over?
- jryan49 9mo ago
  I think the west is scared of China trying to take over the world by force like the USSR.
- AnimalMuppet 9mo ago
  It's because Xi has demanded that China's military be ready to invade and conquer Taiwan by 2027. It's because Xi has made reunification with Taiwan a test of the legitimacy of the CCP's rule over China. The combination of those two things gives you a "China scare" with respect to Taiwan, out of Xi's own mouth.
- ahmeneeroe-v2 9mo ago
  It's easier to explain if we knew your country. But in general: limited resources, us vs them, etc. Same thing as Rome vs Carthage.
- wiredpancake 9mo ago
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jmyeet 9mo ago
Anyone who is unironically saying China attacking Taiwan is a real threat (eg The Anthropic CEO quoted in the article) is either simply echoing the administration's painting of China as a geopolitical bogeyman or they're just ignorant of geopolitics, likely because they're projecting American economic imperialism onto China. I'm glad the article dismissed this as a threat because it isn't one. The official policy of the US is the One China policy. You'll see this described as "strategic ambiguity". That's another way of saying that the official policy is simply to lie about supporting Taiwan's independence. China can only hurt their position by taking military action against Taiwan. Also, it's highly debatable if they even have the military capability to invade Taiwan. Naval blockade? Sure. But to what end? China is going to make their own chips. They'll just hire the right people to replicate EUV lithography. The article brought up nuclear weapons. It's a good analogy. At the end of WW2 the thinking of the US military was that the USSR would take 20+ years to get the bomb if they ever got it. It took 4 years. The gap with the hydrogen bomb was even less. Western chauvinism in policy circles completely underestimates China's capacity to catch up in lithography. Not selling the best chips to China created a captive market for Chinese chipmakers. I also think TSMC is being understandably cautious in not expanding their CapEx. AI companies really should focus on an economic use case for AI more than worry that foundry capacity will somehow limit a theoretical future AI use case.
- reducesuffering 9mo ago
  jmyeet: "Putin is in the wrong here but there are no good guys. US rhetoric on this has predicted a full-scale invasion that hasn't come to fruition multiple times and the media just laps it up. It's reminiscent of the WMD justification for invading Iraq. It's straight up Manufacturing Consent [1]. However, Putin has a point: extending NATO membership to Ukraine is an overtly hostile act by the US and NATO member states. Putin no more wants NATO bases in the Ukraine than the US would want Chinese or Russian military bases in Canada or Mexico. But Russia is not and never was going to launch a full-scale invasion of Ukraine. It would destroy Russia. Trying to do this in Afghanistan, a substantially smaller and less developed country, played a significant factor in the collapse of the Soviet Union. Russia wants a buffer between it and NATO and access to the Black Sea. That's it." https://news.ycombinator.com/item?id=30421629 https://news.ycombinator.com/item?id=30421629
tgtweak 9mo ago
I really don't understand why companies are ignoring intel's foundry services... for the first time since probably the 2000's, intel's 18A nodes are significantly ahead of what TSMC is offering. Apparently they have capacity and are demonstrating wafer production with their own chips. It seems wholly illogical that Apple would get refused wafer volume by TSMC and still refuse to give volume to intel foundry services. When you layer on geopolitical factors and national security implications + the fact that Apple is a US company - what reason could they possibly have to turn the shoulder to intel's foundries? If Taiwan ends up imploding in any of the numerous ways we are aware of today - and which this article adds to - I think there are exactly zero reasons to feel like this couldn't have been avoided.
- 9cb14c1ec0 9mo ago
  This is why: https://arstechnica.com/gadgets/2026/01/core-ultra-series-3-launch-may-be-hampered-by-chip-shortages-says-intel/ https://arstechnica.com/gadgets/2026/01/core-ultra-series-3-... Intel doesn't have any spare capacity.
- deleted 9mo ago
  [deleted]
- Kenji 9mo ago
  [dead]
- variaga 9mo ago
  Some of us are old enough to remember the last time Intel was definitely, 100%, for-sure committed to offering foundry services, and then changed their mind and canceled the whole thing (it was in 2018) and want to see (a) someone else have success with 18A first and (b) intel show an actual long-term commitment to using their foundry for outside customers before we risk our companies' future on them. There are risks with TSMC, but "TSMC just decides it's not interested in making chips for other people, and cancels the whole business" isn't one of them. The same cannot be said for Intel.
  - tgtweak 9mo ago
zpeti 9mo ago
I remember Elon saying in an interview recently that the only piece of the vertical stack he doesn't own is chips. I strongly suspect some sort of fab built by Elon associated companies will be announced soon. Almost all supply can be bought by Tesla and xAI. It makes sense, IF he can get the tech to work at the bleeding edge. But he seems to be quite good at this.
- tgtweak 9mo ago
  He hasn't offered any production services to third parties whatsoever (seems to end at patents/standards gifting) - I wouldn't expect a fab open to third parties at all - if anything it'll be reserved for tesla/space-x/x.ai usage and candidly I don't think there's enough demand there to justify the capex involved in a fab.
- bigyabai 9mo ago
  Standing up a modern-node EUVL fab is harder than rocket science. Tesla and xAI don't have the capex to do it, and the silicon they manufacture would be competing against much more experienced fabs like Samsung and Intel. Frankly it is hopeless, I would be dumbfounded if Elon ever walked through the doors of ASML.
- aurareturn 9mo ago
  I strongly suspect some sort of fab built by Elon associated companies will be announced soon. Almost all supply can be bought by Tesla and xAI. Fab costs follow Rock's Law which is that the cost of building a fab doubles every 4 years. Right now, it costs TSMC roughly $25-$40b for each N2 fab. It's going to cost $50b - $80b for an A14 fab 4 years from now. And then $100b - $160b again. You need many customers in order to justify the cost. Tesla and xAI themselves won't be enough.
jackliuhahaha 9mo ago
TSMC just needs to change its name to USMC and the stock will easily go up 20%
christkv 9mo ago
Im always surprised people forget that Intel exists and still has high performance nodes (just release panther lake on their newest node). They even have a plant in Ireland.
- aurareturn 9mo ago
  No one forgets that. Intel will get some customers. It's inevitable because according to the article, TSMC had severely underestimated AI demand in 2023 and 2024 by not drastically increasing capex in those years.
- junesix 9mo ago
  It's not that people forget that Intel exists, it's that they are effectively irrelevant to the foundry business. > Becoming a meaningful customer of Samsung or Intel is very risky: it takes years to get a chip working on a new process, which hardly seems worth it if that process might not be as good, and if the company offering the process definitely isn’t as customer service-centric as TSMC. TSMC is a reliable supplier and there are no doubts about conflicts of interest. The same cannot be said for Intel and Samsung. If Intel's AI chip business faces chip shortages (like what may already be happening), can their foundry be depended on to ship your chips? No one wants to be the idiot who staked their future on Intel and then gets wiped out when Intel doesn't deliver.
aurareturn 9mo ago
Rather, the only thing that will truly motivate TSMC to take on more risk is competition. I see it another way for more chip manufacturing capacity. If big tech wants TSMC to increase capacity drastically without TSMC having to take all the risk of CapEx, then they can pre-pay for wafers from TSMC. They can each give TSMC $10b now in cash and guarantee themselves wafers in 2-3 years that it takes to bring a new fab online. TSMC is rightfully conservative. If they commit to spending an extra $30b on a fab now that won't make a single wafer until 2029, without any guarantees from big tech, they're stupid. Who knows if the demand will still be there (my guess is yes, but who knows?). In my opinion, I think it's getting close to this. Nvidia will surpass Apple as TSMC's biggest customer this year. This will start a war for TSMC wafers in 2026 in my opinion. When you have that much demand, customers will be forced to pay well in advance. There is already a war for memory, silver, copper, energy. No reason why chip production won't be next.
- vondur 9mo ago
  Isn't that what Apple did originally with TSMC? Payed for capacity rollout?
  - aurareturn 9mo ago
    I think most customers nowadays pre-pay for fab capacity. TSMC is running at 100% capacity for their N5, N3, and N2 nodes. Apple certainly makes extra commitments to be the first to use a new TSMC advanced node. They will be the first to ship an N2 chip by a few months when they release the iPhone 18 Pro. However, I'm talking about booking wafers from a fab that hasn't started and won't make a single wafer 3 years from now. The scale is different. Imagine Nvidia, Apple, Google, AMD, Microsoft, Meta, Amazon telling Wall Street in their earnings report that they sent TSMC $5 billion each this quarter and won't receive a single wafer for another 3 years from the investment. I fully expect this to happen soon. I'm almost certain that you'll hear in the upcoming earnings reports that big tech sent Samsung, Micron, and SK Hynix billions in advance payment to secure memory supply years from now. I think this is likely the same for chip fab capacity soon.
    - 9mo ago
davidhyde 9mo ago
> “I would ban the sale of semiconductor manufacturing equipment to Chinese fabs”. Ahem, ASML, who makes the manufacturing equipment for TSMC is a Dutch company, not a US one.
- mrDmrTmrJ 9mo ago
  The UV light source that ASML uses for its lithography machine is technology that was acquired in the 2013 acquisition of San Diego-based Cymber. The tech stack for the advanced light source dates back to the "EUV LLC Initiative," led by DARPA in the mid-1990s. US origins of the key technology here give the US a veto here regardless of ASML's Dutch headquarters.
  - manuelmoreale 9mo ago
    > US origins of the key technology here give the US a veto here regardless of ASML's Dutch headquarters. Is this an actual thing? Genuinely asking. Not that rules and laws seem to matter anymore to the current US administration anyway
    - chemeng 9mo ago
      Yes, the mechanism is effectively EAR/FDPR and you can check (https://en.wikipedia.org/wiki/Extreme_ultraviolet_lithography https://en.wikipedia.org/wiki/Extreme_ultraviolet_lithograph...) for more detailed history, but the EUV technology ASML further developed and commercialized (no small feat) was licensed from a US Govt created consortium by which the government maintains their IP rights.
      - lovich 9mo ago
        Not sure why IP law would be respected if the king actually pulls the trigger on taking Greenland. That’s not guaranteed at this point, but it’s also not off the table since all the old rules are being shredded as fast as possible.
  - nine_k 9mo ago
burnt-resistor 9mo ago
Perhaps there is an unpleasant but more expedient geopolitical, temporary solution: Taiwan needs its own nukes. Strength seems to be all that PRC respects.
user3939382 9mo ago
You hedge this risk by migrating non AI workloads to new architectures that need 80% less energy. You don’t need TSMC chips. AI arch itself is also weak right now. It can be refactored to work distributed and with much more reasoning power on much less hardware. Basically the current stack is primitive, so we waste 80% of the juice and then worry about how to power our inefficient mess. That’s the wrong set of questions. No one will listen to me until I build it myself because everyone thinks they know everything.
- danw1979 9mo ago
  I was thinking exactly this. The TSMC brake can only be a good thing if it constrains capacity on a wasteful industry and encourages research into efficiency. If it also diverts workloads away from LLMs that we all know really belong elsewhere, more’s the better.
Traster 9mo ago
I think this article doesn't really engage with why TSMC is in the position it is in. It is in the position it's in due to 2 key reasons. The first is scale, in order to make the R&D worth it you need to sell a hell of a lot of chips. So you need scale in order for the economics to work. One of the things a lot of people point to in the downfall of Intel is they missed mobile and that just cut the legs out of their scale. The second reason is the opposite though. The industry is cyclical. If you invest a tonne now, and that investment comes to fruition just as you hit the bottom of a cycle you're just going to go bankrupt. You'll have a tonne of capacity, no demand and businesses are designed to go bankrupt in exactly that way. You only need a small surplus of demand to skyrocket prices, and you only need a small deficit of demand to turn into a fire sale. Let's put it this way - Ben points at a graph and says "Look, here's where ChatGPT got released - and the YoY CapEx went down!". Yes, that is exactly the cyclical nature. It takes a long term to sort the logistics for this industry, so if you see demand in early 2023, that's going to turn into CapEx in 2025 - and it did, a 35% increase in CapEx YoY is yuuuge. The problem is that if you say competition is the answer what you're really saying is you want one player in the industry to chase a pro-cyclical demand cycle and that will blow them up. The result of this strategy is just to sacrifice the leading players each cycle. The logical answer is actually, if Google wants TSMC to push CapEx into a bubble, Google should under-write it. Judge where you expect demand to be and hand over cash to buy the chips now. TSMC will build it. If you guarantee revenue in 2029, TSMC will absolutely guarantee you capacity. But Google doesn't beleive it, and they certainly won't pay up front for it. No, what you'll get is special purpose vehicles that look a lot like the big tech companies guaranteeing projects - in a way that doesn't show up on their balance sheets now - but turn out not to be guarantees if it turns sideways. And TSMC can't afford that counter party risk.

167 points by swolpers 9mo ago

There are some near ready foundries in the US and in EU, not to mention South Korea. It would take a few years to catch up of course. What I worry more about is the full lock-in of TSMC production capacity by nvidia/apple/amd/etc for their chips on their latest and greatest silicon process (aka the best in the world). There is 'no space' for performant large RISC-V implementations or other alternative (and it will require several iterations and mistakes will be made)

iszomer 9mo ago
Tenstorrent managed to secure TSMC manufacturing capacity, I doubt many other RISC-centric fabless companies would have any issues aside from aggressive competition.
- sylware 9mo ago
  I wonder when we will see RISC-V (rva23+) large implementations, for instance for performance "desktop" at 5GHz+ on latest silicon process... I know I can already replace my rpi3 with a linux supported out of the box RISC-V SOC board (aka, the enabling of assembly written software = no planned obsolescence from computer languages anymore, near 0-SDK).
mrec 9mo ago
Interesting point, although it's clearly not in TSMC's interest to land themselves in a monopsony situation by allowing Apple (e.g.) to squeeze all their competitors out of the market.
christkv 9mo ago
Im the EU there is Intel Ireland at least.

DivingForGold 9mo ago

"AI has a physical dependency in Taiwan that can be easily destroyed by Chinese missiles, even without an invasion" ? Arguably false. Why do you think the US has encouraged TSMC foundries, now inside Arizona ? It's obviously to protect against the scenario that China takes Taiwan. In that case, give it 6 months or less for US TSMC foundries to produce the finest. China taking Taiwan will likely not result in the CCP getting any technology, certainly Taiwanese have "contingency plans" to vaporize all tech in the event they are invaded.

showerst 9mo ago
90% of TSMC's capacity is still in Taiwan. A substantial amount of global high end chip capacity is also in South Korea and Japan, which would likely get pulled in. A war would not wipe out chip production, but the squeeze would be immense for many years.
- fc417fc802 9mo ago
  > A war would not wipe out chip production It probably wouldn't but it definitely could.
palmotea 9mo ago
That's over-optimistic. > Why do you think the US has encouraged TSMC foundries, now inside Arizona ? It's obviously to protect against the scenario that China takes Taiwan. In that case, give it 6 months or less for US TSMC foundries to produce the finest. American business culture works pretty strongly against "give it 6 months or less for US TSMC foundries to produce the finest." I think it's most likely those fabs will stagnate and the American MBAs running them will just milk them for short-term profits. Why invest in technology when you can buy back shares? After all, your only goal is number-go-up. > China taking Taiwan will likely not result in the CCP getting any technology, certainly Taiwanese have "contingency plans" to vaporize all tech in the event they are invaded. Not necessarily. Technology isn't so much the machines, it's the know-how. TMSC employees will still need jobs, post invasion, and I'm sure China will pay them very well. Some fraction will go to work for Chinese fabs, and teach them TMSC's tricks and knowledge.

buckle8017 9mo ago

> AI has a physical dependency in Taiwan that can be easily destroyed by Chinese missiles, even without an invasion Taiwan has missiles with the range and warheads to strike the three gorges dam. An attack by China would end very poorly for everybody. There are millions of people living in the inundation zone.

fruitworks 9mo ago
Could the chinese construct a sufficient anti-missle defence?
- buckle8017 9mo ago
  Obviously the actual number of missiles Taiwan has is not public, but I suspect they have enough that reliably intercepting a full barrage is not something even the us could pull off.
  - wat10000 9mo ago
    The general calculus is that an interceptor costs as much as the missile it intercepts, so defenses are only effective against an adversary with much less resources. Hence Israel can defend against Hamas/Hezbollah, and the US can defend against North Korea, but Israel struggles against Iran and the US doesn't even try to defend against China/Russia. China obviously has a lot more resources than Taiwan, but then you have a concentration effect where an attacker can focus their resources on a single target, but a much more resourced defender can't necessarily afford to defend that target. We saw that play out with the UK's nuclear deterrent strategy in the cold war, where they focused on overwhelming Moscow's defenses, and were (probably) able to do it despite the USSR being so much bigger.
    - maxglute 9mo ago
      TW missiles can't "concentrate" because TW geography = all missile flight paths travels through boost, midcourse and terminal interceptors gauntlet along PRC easter theatre command which probably has the densest IADS in the world. PRC has like 3-4x more interceptors in eastern theater (8-12x more total) than TW has missiles. That's just land based, there's also 1000s of naval picket interceptors. Imagine if all of US patriot batteries in Florida, multiplied by 3, then asking what Cuba can do to saturate. Then add in USN DDGs and the answer is realistically nothing, because the industrial math is brutally lopsided. That's assuming TW gets to coordinate salvo their entire inventory, realistically most TELs would be glassed first, every part of TW is withing 5-7 min of PRC missiles and mlrs, less if fired from strait or loitering munitions, i.e. basically faster than abbreviated TEL setup cycle TW has for their tunnel to launch strike complex.

alephnerd 9mo ago

From a NatSec perspective, TSMC isn't really a bottleneck - most weapon systems use SoCs and microcontrollers that can be fabbed on "legacy nodes" (ie. 28/40/60/90nm) or 14/20/22nm nodes, and compound semiconductors. The ability to mass produce a Pascal or Volta comparable GPU or Apple A11 comparable SoC is all you need for more cutting edge systems. Power Electronics and Compound Semiconductors (GaN, SiC) have historically been the biggest bottleneck. The bigger risk for the TSMC-China aspect is TSMC's planned exit of GaN foundry production by 2027. Most Chinese manufacturers still depend on TSMC-produced GaNs wafers instead of domestically produced GaN vendors due to reliability concerns. China will probably end up matching TSMC's specs for compound semiconductors in 4-7 years, but that implies that the Sullivan Doctrine still holds and is a loss for China. Every other country with compound semiconductor production capabilities at scale (US, Germany, France, South Korea, Japan, Israel, Russia, India) either limits their exports or cannot export them to China without facing sanctions from other buyers (primarily Russia as India does not allowing commingling of SKUs for defense vendors who sell to Pakistan/China as well, and Russian vendors are members of India's EW and DEW program). If a US-China War was to arise, worst case we would probably see a mass reversion back to 2018-22 level technology, which isn't the end of the world. Additonally, the China-Taiwan situation is orthogonal to semiconductor dependency.

joe_mamba 9mo ago
>If a US-China War was to arise, worst case we would probably see a mass reversion back to 2018-22 level technology, which isn't the end of the world. It wouldn't be the end of the world if those 2018 chips came at 2018 prices and only impacted commodity stuff like phones, datacenters and laptops, but they'll be at 10x the 2018 price and impact critical stuff like automotive, the cars and trucks that gets your food delivered to the supermarket, and if those become impossible to buy or fix anymore, then your groceries will also get more expensive, triggering an end-of-the-world riot from taxpayers who can't afford food anymore. People need to view this issue as not just being stuck with 2018 laptops and phones which isn't that bad, but has much wider societal implications.
- alephnerd 9mo ago

boxed 9mo ago

> Rather, the only thing that will truly motivate TSMC to take on more risk is competition. Maybe I missed something, but if Google, Microsoft, Apple, OpenAI, etc want more capex on fabs, they can front that money themselves?

aurareturn 9mo ago
Yes. I think the article missed it. In fact, I expect it to happen this year when Nvidia overtakes Apple as TSMC's biggest customer. It's going to start a wafer war in my opinion. Best way to secure wafer supply is to pre-pay.

kouteiheika 9mo ago

> Anthropic Chief Executive Officer Dario Amodei said selling advanced artificial intelligence chips to China is a blunder with “incredible national security implications” [...] “I think this is crazy. It’s a bit like selling nuclear weapons to North Korea.” This is all a smoke screen. He knows very well that China can and will develop their own hardware to train AI models (and in fact, they are successfully doing just that; e.g. the recently released GLM-Image was trained on their own silicon). His only objective here is to slow them down enough so that they don't eat Anthropic/Claude's lunch releasing open-weight models that are increasingly competitive. But he can't just openly say "hey, we don't like that they release open weight models for free", so he's engaging in the AI version of the "think of the children" argument. Anthropic's whole modus operandi was always pretty much "we should control this technology, no one else". It's not a coincidence they're the only major lab which has not released any open weight models, they don't publish any useful research (for training models) and they actively lobby the lawmakers to restrict people's access to open weight models. It's incredibly ironic that Dario is worried about (I quote) "1984 scenarios" while that's exactly what his company is aiming towards (e.g. giving Palantir access to those models is not "unsafe", but an average Joe having unrestricted local access is an immediate 1984-style dystopia).

aurareturn 9mo ago
Yes. Dario Amodei is just using "china bad" to stave off competition. I highly doubt he cares one bit about anything else except his own wallet and power.
jononor 9mo ago
This is likely. His concern is first and foremost the company. Geopolitics is primarily a potential tool in that capacity.
Jyaif 9mo ago
Another reason he wants fewer people buying AI chips is that less demands leads to smaller price, which would reduce the capex of his company.

CMay 9mo ago

The more complex the process becomes, the harder it is to have equivalent competition so you're bound to have issues where a single company's investment decisions have widespread impacts. My perspective on the China risk differs some, though. China wouldn't benefit much from attacking TSMC. This is the first time I've heard anyone suggest that they might. At best they'd like to have it in-tact if they do take Taiwan, but there have been talks about machines being rigged to explode to deny them from China, or the US striking them in that scenario. If neither we nor China get to work with TSMC, then we're still ahead in relative terms. If China did attack TSMC, they set the norm that the fabs (including their own) are now a fair target which would be a larger disadvantage for them than it would be for us since China's physical power projection remains pretty regional outside of Chinese nationals abroad engaging in sabotage. That is one of their biggest weaknesses. Yes they have a lot of manufacturing capacity and a large population with many talented people, but in a way we have lent them the power to scale up to see what they'll do. We are already putting some pressure on that scale now that they've shown who they are, but if it came to war it would be very doable to start reversing their scale and their capacity to do the same to us would degrade as ours increases. Even if all the AI in the world was destroyed, that's how it would play out. The problem is that Taiwan remains in close proximity to China so similar to Ukraine it would likely come down to how long they're willing to throw everything at it. If Russia and China wanted to be powerful, it's just idiocy to show the existing superpower that you cannot be trusted with the power you have. If they fancy a merit based society, they forgot that merit isn't omnipotence and you still need the right ideas to be at the top to accompany the merit. For China maybe they need AI for that alone, but western societies at least have ways for the right ideas to make it to the top without the strict need of AI.

nebula8804 9mo ago
The US has shown that it can't handle any level of discomfort. The reason Trump is back in the white house is because grocery prices went up a little bit. Can you imagine the failure of the tech companies that are propping up the entire economy? That would happen under a Taiwan invasion scenario. China has a much high pain tolerance than US citizens at least. I'd argue they would outlast the US. Would they outlast the US military? I don't know. But it may not matter as given enough pain the US population will make itself heard.

throwaway63253 9mo ago

Honest question, from non-american: what is up with all the China scare? I just can't understand it. Is it because China is socialist and we want to see capitalism winning over?

jryan49 9mo ago
I think the west is scared of China trying to take over the world by force like the USSR.
AnimalMuppet 9mo ago
It's because Xi has demanded that China's military be ready to invade and conquer Taiwan by 2027. It's because Xi has made reunification with Taiwan a test of the legitimacy of the CCP's rule over China. The combination of those two things gives you a "China scare" with respect to Taiwan, out of Xi's own mouth.
ahmeneeroe-v2 9mo ago
It's easier to explain if we knew your country. But in general: limited resources, us vs them, etc. Same thing as Rome vs Carthage.
wiredpancake 9mo ago
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jmyeet 9mo ago

Anyone who is unironically saying China attacking Taiwan is a real threat (eg The Anthropic CEO quoted in the article) is either simply echoing the administration's painting of China as a geopolitical bogeyman or they're just ignorant of geopolitics, likely because they're projecting American economic imperialism onto China. I'm glad the article dismissed this as a threat because it isn't one. The official policy of the US is the One China policy. You'll see this described as "strategic ambiguity". That's another way of saying that the official policy is simply to lie about supporting Taiwan's independence. China can only hurt their position by taking military action against Taiwan. Also, it's highly debatable if they even have the military capability to invade Taiwan. Naval blockade? Sure. But to what end? China is going to make their own chips. They'll just hire the right people to replicate EUV lithography. The article brought up nuclear weapons. It's a good analogy. At the end of WW2 the thinking of the US military was that the USSR would take 20+ years to get the bomb if they ever got it. It took 4 years. The gap with the hydrogen bomb was even less. Western chauvinism in policy circles completely underestimates China's capacity to catch up in lithography. Not selling the best chips to China created a captive market for Chinese chipmakers. I also think TSMC is being understandably cautious in not expanding their CapEx. AI companies really should focus on an economic use case for AI more than worry that foundry capacity will somehow limit a theoretical future AI use case.

reducesuffering 9mo ago
jmyeet: "Putin is in the wrong here but there are no good guys. US rhetoric on this has predicted a full-scale invasion that hasn't come to fruition multiple times and the media just laps it up. It's reminiscent of the WMD justification for invading Iraq. It's straight up Manufacturing Consent [1]. However, Putin has a point: extending NATO membership to Ukraine is an overtly hostile act by the US and NATO member states. Putin no more wants NATO bases in the Ukraine than the US would want Chinese or Russian military bases in Canada or Mexico. But Russia is not and never was going to launch a full-scale invasion of Ukraine. It would destroy Russia. Trying to do this in Afghanistan, a substantially smaller and less developed country, played a significant factor in the collapse of the Soviet Union. Russia wants a buffer between it and NATO and access to the Black Sea. That's it." https://news.ycombinator.com/item?id=30421629 https://news.ycombinator.com/item?id=30421629

tgtweak 9mo ago

I really don't understand why companies are ignoring intel's foundry services... for the first time since probably the 2000's, intel's 18A nodes are significantly ahead of what TSMC is offering. Apparently they have capacity and are demonstrating wafer production with their own chips. It seems wholly illogical that Apple would get refused wafer volume by TSMC and still refuse to give volume to intel foundry services. When you layer on geopolitical factors and national security implications + the fact that Apple is a US company - what reason could they possibly have to turn the shoulder to intel's foundries? If Taiwan ends up imploding in any of the numerous ways we are aware of today - and which this article adds to - I think there are exactly zero reasons to feel like this couldn't have been avoided.

9cb14c1ec0 9mo ago
This is why: https://arstechnica.com/gadgets/2026/01/core-ultra-series-3-launch-may-be-hampered-by-chip-shortages-says-intel/ https://arstechnica.com/gadgets/2026/01/core-ultra-series-3-... Intel doesn't have any spare capacity.
deleted 9mo ago
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Kenji 9mo ago
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variaga 9mo ago
Some of us are old enough to remember the last time Intel was definitely, 100%, for-sure committed to offering foundry services, and then changed their mind and canceled the whole thing (it was in 2018) and want to see (a) someone else have success with 18A first and (b) intel show an actual long-term commitment to using their foundry for outside customers before we risk our companies' future on them. There are risks with TSMC, but "TSMC just decides it's not interested in making chips for other people, and cancels the whole business" isn't one of them. The same cannot be said for Intel.
- tgtweak 9mo ago

zpeti 9mo ago

I remember Elon saying in an interview recently that the only piece of the vertical stack he doesn't own is chips. I strongly suspect some sort of fab built by Elon associated companies will be announced soon. Almost all supply can be bought by Tesla and xAI. It makes sense, IF he can get the tech to work at the bleeding edge. But he seems to be quite good at this.

tgtweak 9mo ago
He hasn't offered any production services to third parties whatsoever (seems to end at patents/standards gifting) - I wouldn't expect a fab open to third parties at all - if anything it'll be reserved for tesla/space-x/x.ai usage and candidly I don't think there's enough demand there to justify the capex involved in a fab.
bigyabai 9mo ago
Standing up a modern-node EUVL fab is harder than rocket science. Tesla and xAI don't have the capex to do it, and the silicon they manufacture would be competing against much more experienced fabs like Samsung and Intel. Frankly it is hopeless, I would be dumbfounded if Elon ever walked through the doors of ASML.
aurareturn 9mo ago
I strongly suspect some sort of fab built by Elon associated companies will be announced soon. Almost all supply can be bought by Tesla and xAI. Fab costs follow Rock's Law which is that the cost of building a fab doubles every 4 years. Right now, it costs TSMC roughly $25-$40b for each N2 fab. It's going to cost $50b - $80b for an A14 fab 4 years from now. And then $100b - $160b again. You need many customers in order to justify the cost. Tesla and xAI themselves won't be enough.

jackliuhahaha 9mo ago

TSMC just needs to change its name to USMC and the stock will easily go up 20%

christkv 9mo ago

Im always surprised people forget that Intel exists and still has high performance nodes (just release panther lake on their newest node). They even have a plant in Ireland.

aurareturn 9mo ago
No one forgets that. Intel will get some customers. It's inevitable because according to the article, TSMC had severely underestimated AI demand in 2023 and 2024 by not drastically increasing capex in those years.
junesix 9mo ago
It's not that people forget that Intel exists, it's that they are effectively irrelevant to the foundry business. > Becoming a meaningful customer of Samsung or Intel is very risky: it takes years to get a chip working on a new process, which hardly seems worth it if that process might not be as good, and if the company offering the process definitely isn’t as customer service-centric as TSMC. TSMC is a reliable supplier and there are no doubts about conflicts of interest. The same cannot be said for Intel and Samsung. If Intel's AI chip business faces chip shortages (like what may already be happening), can their foundry be depended on to ship your chips? No one wants to be the idiot who staked their future on Intel and then gets wiped out when Intel doesn't deliver.

aurareturn 9mo ago

Rather, the only thing that will truly motivate TSMC to take on more risk is competition. I see it another way for more chip manufacturing capacity. If big tech wants TSMC to increase capacity drastically without TSMC having to take all the risk of CapEx, then they can pre-pay for wafers from TSMC. They can each give TSMC $10b now in cash and guarantee themselves wafers in 2-3 years that it takes to bring a new fab online. TSMC is rightfully conservative. If they commit to spending an extra $30b on a fab now that won't make a single wafer until 2029, without any guarantees from big tech, they're stupid. Who knows if the demand will still be there (my guess is yes, but who knows?). In my opinion, I think it's getting close to this. Nvidia will surpass Apple as TSMC's biggest customer this year. This will start a war for TSMC wafers in 2026 in my opinion. When you have that much demand, customers will be forced to pay well in advance. There is already a war for memory, silver, copper, energy. No reason why chip production won't be next.

vondur 9mo ago
Isn't that what Apple did originally with TSMC? Payed for capacity rollout?
- aurareturn 9mo ago
  I think most customers nowadays pre-pay for fab capacity. TSMC is running at 100% capacity for their N5, N3, and N2 nodes. Apple certainly makes extra commitments to be the first to use a new TSMC advanced node. They will be the first to ship an N2 chip by a few months when they release the iPhone 18 Pro. However, I'm talking about booking wafers from a fab that hasn't started and won't make a single wafer 3 years from now. The scale is different. Imagine Nvidia, Apple, Google, AMD, Microsoft, Meta, Amazon telling Wall Street in their earnings report that they sent TSMC $5 billion each this quarter and won't receive a single wafer for another 3 years from the investment. I fully expect this to happen soon. I'm almost certain that you'll hear in the upcoming earnings reports that big tech sent Samsung, Micron, and SK Hynix billions in advance payment to secure memory supply years from now. I think this is likely the same for chip fab capacity soon.
  - 9mo ago

davidhyde 9mo ago

> “I would ban the sale of semiconductor manufacturing equipment to Chinese fabs”. Ahem, ASML, who makes the manufacturing equipment for TSMC is a Dutch company, not a US one.

mrDmrTmrJ 9mo ago
The UV light source that ASML uses for its lithography machine is technology that was acquired in the 2013 acquisition of San Diego-based Cymber. The tech stack for the advanced light source dates back to the "EUV LLC Initiative," led by DARPA in the mid-1990s. US origins of the key technology here give the US a veto here regardless of ASML's Dutch headquarters.
- manuelmoreale 9mo ago
  > US origins of the key technology here give the US a veto here regardless of ASML's Dutch headquarters. Is this an actual thing? Genuinely asking. Not that rules and laws seem to matter anymore to the current US administration anyway
  - chemeng 9mo ago
    Yes, the mechanism is effectively EAR/FDPR and you can check (https://en.wikipedia.org/wiki/Extreme_ultraviolet_lithography https://en.wikipedia.org/wiki/Extreme_ultraviolet_lithograph...) for more detailed history, but the EUV technology ASML further developed and commercialized (no small feat) was licensed from a US Govt created consortium by which the government maintains their IP rights.
    - lovich 9mo ago
      Not sure why IP law would be respected if the king actually pulls the trigger on taking Greenland. That’s not guaranteed at this point, but it’s also not off the table since all the old rules are being shredded as fast as possible.
- nine_k 9mo ago

burnt-resistor 9mo ago

Perhaps there is an unpleasant but more expedient geopolitical, temporary solution: Taiwan needs its own nukes. Strength seems to be all that PRC respects.

user3939382 9mo ago

You hedge this risk by migrating non AI workloads to new architectures that need 80% less energy. You don’t need TSMC chips. AI arch itself is also weak right now. It can be refactored to work distributed and with much more reasoning power on much less hardware. Basically the current stack is primitive, so we waste 80% of the juice and then worry about how to power our inefficient mess. That’s the wrong set of questions. No one will listen to me until I build it myself because everyone thinks they know everything.

danw1979 9mo ago
I was thinking exactly this. The TSMC brake can only be a good thing if it constrains capacity on a wasteful industry and encourages research into efficiency. If it also diverts workloads away from LLMs that we all know really belong elsewhere, more’s the better.

Traster 9mo ago

I think this article doesn't really engage with why TSMC is in the position it is in. It is in the position it's in due to 2 key reasons. The first is scale, in order to make the R&D worth it you need to sell a hell of a lot of chips. So you need scale in order for the economics to work. One of the things a lot of people point to in the downfall of Intel is they missed mobile and that just cut the legs out of their scale. The second reason is the opposite though. The industry is cyclical. If you invest a tonne now, and that investment comes to fruition just as you hit the bottom of a cycle you're just going to go bankrupt. You'll have a tonne of capacity, no demand and businesses are designed to go bankrupt in exactly that way. You only need a small surplus of demand to skyrocket prices, and you only need a small deficit of demand to turn into a fire sale. Let's put it this way - Ben points at a graph and says "Look, here's where ChatGPT got released - and the YoY CapEx went down!". Yes, that is exactly the cyclical nature. It takes a long term to sort the logistics for this industry, so if you see demand in early 2023, that's going to turn into CapEx in 2025 - and it did, a 35% increase in CapEx YoY is yuuuge. The problem is that if you say competition is the answer what you're really saying is you want one player in the industry to chase a pro-cyclical demand cycle and that will blow them up. The result of this strategy is just to sacrifice the leading players each cycle. The logical answer is actually, if Google wants TSMC to push CapEx into a bubble, Google should under-write it. Judge where you expect demand to be and hand over cash to buy the chips now. TSMC will build it. If you guarantee revenue in 2029, TSMC will absolutely guarantee you capacity. But Google doesn't beleive it, and they certainly won't pay up front for it. No, what you'll get is special purpose vehicles that look a lot like the big tech companies guaranteeing projects - in a way that doesn't show up on their balance sheets now - but turn out not to be guarantees if it turns sideways. And TSMC can't afford that counter party risk.