US, Europe 'unrealistic' in fab expansion drive, says TSMC chair(digitimes.com)
digitimes.com
US, Europe 'unrealistic' in fab expansion drive, says TSMC chair
https://www.digitimes.com/news/a20210331PD206.html
30 comments
Won't this lead to innovation grinding to a halt? Right now TSMC has a decent profit margin to re-invest into newer technologies. If the margins become thinner, the industry will find it difficult to set aside R&D dollars for the newest technologies.
Of course, you can always have a newcomer who can disrupt the market but most Moore's law advancements appear to happen in government funded research labs and large semiconductor companies.
Of course, you can always have a newcomer who can disrupt the market but most Moore's law advancements appear to happen in government funded research labs and large semiconductor companies.
Not necessarily. Most innovation is state funded in general. Real innovation requires either monopoly profits or state funding because otherwise research must necessarily be directed towards short term payoffs.
Investors will not tolerate time lines of 10+ years and hundreds of millions to billions of dollars sunk.
Investors will not tolerate time lines of 10+ years and hundreds of millions to billions of dollars sunk.
Do you mean healthy profit margins?...because I'd rather prefer a combination of big profits, state subsidies and healthy competition than a monopolised/oligopolised market
Unfortunately, I did mean monopoly profits. In a non-monopoly situation, competition exists which forces market participants to constantly reduce costs and compete on quality or price. Eventually, a single or few participants will be left standing as the others fail and the the remaining ones engage in a process of buying their supplies and workers at discount prices. This is not an environment that supports long term thinking.
There might be an exception here and there, but there will be some structural reason why long term planning is possible (such as competition not being able to step on each others toes). It's not true in the general case.
There might be an exception here and there, but there will be some structural reason why long term planning is possible (such as competition not being able to step on each others toes). It's not true in the general case.
Most ‘expensive basic’ innovation is state funded.
Most short-term <10 year innovation is industry funded.
Most short-term <10 year innovation is industry funded.
True, that's because the system is designed to subsidize expensive research and let industry exploit cheap research. It makes no sense to think that state funding, having already done the heavy lifting, can't do the last mile.
Industry mainly provides access to the scalable means of production for tinkering, which can be owned by anyone, not just industrialists.
Industry mainly provides access to the scalable means of production for tinkering, which can be owned by anyone, not just industrialists.
Companies can still invest in R&D even if they aren't a monopoly.
Note that this announcement comes right on the heels of TSMC announcing that they aren't reducing their prices this year.
Note that this announcement comes right on the heels of TSMC announcing that they aren't reducing their prices this year.
I think TSMC over estimates how state sponsored fabs would look like. I can predict now that it will be a disaster and many billions will be funnelled to bureaucrat friends through questionable procurement. If there is going to be a miracle and they actually build a fab, it will be lacking as they will not find specialists willing to work for EU wages and level of taxation.
I think Intel will do a good job of it. They have no choice if they get this expansion wrong they are done.
My expectations for Europe though, are sadly much lower.
My expectations for Europe though, are sadly much lower.
Europe saves on shipping from ASML to any fabs on the continent! That's a competitive advantage!
/s
/s
To some extent it's true, but pretty minimal as ASML sometimes delivers machinery to their East Asian customers by rail to China then does the last bit by sea.
Sounds like someone wants to hold onto unsustainable monopoly.
Edit: chip shortage has been a known variable for over a year now. I think TSM overplayed its hands a bit. They didn’t want to expand and get caught when the demand would subside, which is very understandable. But what they didn’t foresee is that the US govt would get involved in propping up its competition in direct response.
Edit: chip shortage has been a known variable for over a year now. I think TSM overplayed its hands a bit. They didn’t want to expand and get caught when the demand would subside, which is very understandable. But what they didn’t foresee is that the US govt would get involved in propping up its competition in direct response.
A year is not nearly enough time to spin up a new fab. It is impossible to say with any certainty that TSMC did not respond correctly to a variable that has been known for only a year.
"We built enough capacity for the world so you shouldn't build any local capacity to ensure resiliency of supply chains because this will harm the current efficiency of our monopoly position."
These people are awful.
That's like saying you should never use anything other than RAID0 because anything else costs you more for the same performance. Yeah, sometimes cost/performance aren't the only important metrics!
The pandemic has literally been a real-life example of the downsides of the approach he is advocating.
These people are awful.
That's like saying you should never use anything other than RAID0 because anything else costs you more for the same performance. Yeah, sometimes cost/performance aren't the only important metrics!
The pandemic has literally been a real-life example of the downsides of the approach he is advocating.
It would be nice if they reported on the reasons given in support of the claims instead of just the claims on their own.
Doesn't this imply that it would be unrealistic to create large amounts of new supply to satisfy local strategic needs in a global economy?
for a large market like the US/Europe couldn't they choose to not participate in the global market for chips? or tip the scales such that local competitors are favored?
I don't see any reason why certain products couldn't be on a sliding tariff scale dependent on how much is imported. 20-40% imports = no tariffs, 80% triggers a sliding tariff scale. This would allow for strategic preservation and global competition. Once you fully outsource an industry it's hard for it to ever grow back - even if it makes sense for it too.
for a large market like the US/Europe couldn't they choose to not participate in the global market for chips? or tip the scales such that local competitors are favored?
I don't see any reason why certain products couldn't be on a sliding tariff scale dependent on how much is imported. 20-40% imports = no tariffs, 80% triggers a sliding tariff scale. This would allow for strategic preservation and global competition. Once you fully outsource an industry it's hard for it to ever grow back - even if it makes sense for it too.
Tariffs like that can backfire and prop up non-innovative companies. The US steel industry is a good example. It’s still based on WWII technology, and there’s guaranteed income regardless of whether it’s competitive.
The question of unprofitability is interesting on large capital projects - it's often a question of what timescale we're talking about, and if nations become involved then the timescales can be both significantly larger as well as the dynamics of possibly loaned or direct grant money for the capital.
If it's a matter of subsidizing one industry to favor the overall economy (e.g. more chips so the automotive and other sectors don't slow down), then nations also get involved. China pretty much directly and openly, and the US/Europe more indirectly.
If it's a matter of subsidizing one industry to favor the overall economy (e.g. more chips so the automotive and other sectors don't slow down), then nations also get involved. China pretty much directly and openly, and the US/Europe more indirectly.
Unrealistic given how much fab facotiries cost.
Your tariff method would work for say mining copper or say iron screws but not for a fab factory as it can't really be scaled halfway
Your tariff method would work for say mining copper or say iron screws but not for a fab factory as it can't really be scaled halfway
What's the US military budget? Let's say DOD decides it wants onshore chips. $10B is peanuts; $100B is easily doable if they say it's important enough- which it is.
the DoD budget was around 700 billion, no one is going to spend around 1/10th of their entire military budget on semi conductors at cost. They're going to assume some returns on these fab factories.
With the price of crypto DoD could self fund its wars by owning advanced fans and licensing GPUs.
They probably already have fabs.
What is the distribution of education-level of workers at a typical fab? Is it like 90% researchers, or more like 90% production workers?
I couldn't find anything by site, but TSMC reported these stats in their 2019 Annual Report as a whole out of 51k employees: 5k managers, 24k professionals, 4k assistants and 17k technicians.
They reported highest level of education for their workforce of: 4.5% PHD, 44.9% Masters, 25.5% Bachelors.
They reported highest level of education for their workforce of: 4.5% PHD, 44.9% Masters, 25.5% Bachelors.
Interesting, thanks!
I think Liu is trying to dismiss the west’s concerns on the only basis that he can: the short term economics. In reality there is a more important strategic priority at the core of these initiatives, but that’s a whole lot harder to play down.
The whole world economy relies on 3 countries in balistic rocket range of each other; not great. Having foundries distributed around the world sounds way more resilient to any conflicts or disasters that might arise in that particular region.
I guess they would say that, right?
The state is free to, and often does, engage in non-profitable production to ensure essential domestic needs can be satisfied.
This doesn't make sense from a market perspective, but it can often make sense from a needs based perspective.