TSMC founder points out core reasons why Samsung and Intel stumbled

[Daniel Nenni]

Credit: DIGITIMES

While competitors Samsung Electronics (Samsung) and Intel are struggling in their foundry businesses, TSMC is set to continue dominating large orders below 7nm through 2025, securing major clients in the AI chip sector, and its 2nm GAA process is scheduled to debut as planned. This has turned the competitive landscape among the three major foundries into a one-man show.

Market estimates suggest that Samsung Foundry's annual market share may fall below 10%. If Intel cannot successfully spin off its foundry business soon, its overall losses will likely continue to expand.

Prior market reports indicated that due to the US-China AI chip ban and ongoing lackluster demand in smartphone and PC end markets, the recovery in AI chip demand remains limited, suggesting that TSMC's revenue declines in November and December could exceed expectations.

Nevertheless, TSMC's utilization rates for its 3nm and 5nm processes reportedly remain fully loaded, allowing November revenue to still reach NT$270 billion to NT$275 billion (approx. US$8.3 billion to US$8.5 billion), consistent with forecasts, indicating that the impact of the AI chip ban appears manageable for TSMC.

TSMC chairman C.C. Wei stated bluntly that TSMC has no competitors, as nearly all global AI chip customers are under its control. With the timely introduction of the 2nm process, TSMC has left its rivals far behind.

Intel struggles strategically while Samsung struggles technically​

On November 9, TSMC founder Morris Chang also pointed out the core reasons why Samsung and Intel's foundry businesses are struggling. He noted that Intel lacks both strategy and leadership, similar to four years ago when the board had no clear vision for future strategies. When selecting a CEO, eloquence alone is insufficient. In contrast, according to Chang, Samsung's issues are primarily technical rather than strategic.

A supply chain insider believes that securing external customer orders is difficult for Samsung and Intel because they operate under the IDM model. Previously, Samsung aimed to leapfrog TSMC with its 3nm GAA process but has yet to secure significant contracts, adversely affecting its own mobile and AI chip developments.

Massive capital expenditures have proven unrecoverable, and with its memory business lagging behind SK Hynix in the HBM arena, a vicious cycle ensues, potentially leading to greater-than-expected losses in its foundry operations, with market share projected to drop below 10% in 2025.

Intel faces even larger challenges, struggling to find a suitable CEO candidate. The sudden change without identifying a replacement first has led to internal morale plummeting. As Chang mentioned, Intel's problems lie in its strategy and management team. While its process technologies and patents remain strong, they are unable to be effectively utilized.

External customers are unlikely to choose a foundry known for inefficiency, high costs, and potential conflicts of interest. After years of stagnation, Intel has yet to discover a viable path to separate manufacturing from design, and prolonged delays will only exacerbate its financial woes.

Experts in the supply chain believe that the current perception in the market is that TSMC's biggest risks stem from expansion efforts by US manufacturers and profitability concerns, along with the stance of the US government. However, given the setbacks faced by Samsung and Intel, TSMC can shift pressure and costs onto its customers since they have no alternative options.

Moreover, TSMC's US clients account for over 70% of its revenue. If TSMC encounters difficulties, major US firms would also suffer, which is undesirable for the US government. Therefore, TSMC holds leverage. What the US government desires is "manufacturing," and TSMC is positioned to deliver that, particularly impacting US companies. By raising the technological and capital investment thresholds for foundry services, TSMC has effectively eliminated competition.

TSMC founder points out core reasons why Samsung and Intel stumbled

While competitors Samsung Electronics (Samsung) and Intel are struggling in their foundry businesses, TSMC is set to continue dominating large orders below 7nm through 2025, securing major clients in the AI chip sector, and its 2nm GAA process is scheduled to debut as planned. This has turned...

www.digitimes.com

 

[Daniel Nenni]

If you want one reason why Intel and Samsung have "stumbled" it is trust. Customers must trust that a foundry will deliver on its commitments. TSMC sets realistic customer goals and exceeds them. Intel and Samsung do quite the opposite which has raised the trust awareness for the foundry business. I don't recall when TSMC put trust in the corporate mission but I do remember thinking genius!

TSMC’s Mission
Our mission is to be the trusted technology and capacity provider of the global logic IC
industry for years to come.

Leadership is certainly a problem Intel and Samsung has struggled with. Samsung Foundry again has new leadership this year as will Intel but again, that goes back to trust.

The second most compelling reason is the ecosystem (customers and partners). Given the dominance of TSMC N3x and N2, the foundry ecosystem has never been stronger and gets bigger every day. It truly is a semiconductor phenomenon that will never be repeated, my opinion.

 

[XYang2023]

I think there is another level of trust: whether customers believe there will be no external interruptions to semiconductor manufacturing in Taiwan.

 

[Daniel Nenni]

I think there is another level of trust: whether customers believe there will be no external interruptions to semiconductor manufacturing in Taiwan.

Given customers have no choice today I do not see that as an issue. The Taiwan Silicon Shield has never been stronger.

What about North Korea/South Korea?

Maybe Trump can turn things around with China?

"President-elect Donald Trump has invited China's President Xi Jinping to his inauguration in January, his spokesperson said Thursday."

 

[XYang2023]

I think that is an ongoing concern; otherwise, Warren Buffett would have remained an investor. Personally, I believe that having factories outside Taiwan would reduce the impact/scope of a conflict, should one occur.

 

[Daniel Nenni]

I think that is an ongoing concern; otherwise, Warren Buffett would have remained an investor. Personally, I believe that having factories outside Taiwan would reduce the impact/scope of a conflict, should one occur.

I think the outside factories help the Silicon Shield but without support from Taiwan they may not survive.

 

[hist78]

I think there is another level of trust: whether customers believe there will be no external interruptions to semiconductor manufacturing in Taiwan.

Although the semiconductor supply interruption can be a serious impact as the result of a war around Taiwan, it's actually is a smaller problem compared to many other more critical issues. For example, South Korea and Japan's South transportation and trade routes will be cut off and there isn't any meaningful new defense line west of US west coast if Taiwan is under CCP's control.

So far, the US government's strategy is loud and clear:

1. Strengthen US-Taiwan political, economical, science, and military relationships and cooperations.

2. Help TSMC and its ecosystem to build fabs and capacity on US soil, such as CHIPS Act and grants.

3. Facilitate and encourage policies and actions that can strengthen Taiwan's economy and US-Taiwan trades. A stronger Taiwan is in the best interest of US.

4. Preposition military assets in South Korea, Japan, and Philippines and conduct frequent military exercises with friendly countries in the East Asia.

5. Tell CCP clearly that a war is not a viable option. And US will intervene forcefully if CCP dares to start one.

 

[soAsian]

I think there is another level of trust: whether customers believe there will be no external interruptions to semiconductor manufacturing in Taiwan.

Isn't TSMC's setup shops oversea a solution to mitigate external disruptions?

they should be able to rebuild and ramp up with oversea fabs(?)

 

[Daniel Nenni]

Isn't TSMC's setup shops oversea a solution to mitigate external disruptions?
they should be able to rebuild and ramp up with oversea fabs(?)

TSMC is doing exactly what TSMC should be doing, strengthening the Silicon Shield. Some people think the threat of China interfering with Taiwan's independence is growing. I disagree. In fact, I think the threat shrinks everyday. I can assure you it is on everyone's mind at TSMC, UMC, Apple, Nvidia, AMD, Broadcom, Qualcom, MediaTek, and the entire semiconductor ecosystem and they are doing everything they can behind the scenes to make sure it does not happen. The same can be said for all of the countries that depend on the Taiwan Strait for commerce and military security.

For the political part, love him or hate him Donald Trump is much better suited for international crisis than Kamala Harris. I would much rather have a crazy man with his finger on the button. He is the one to be feared.

I remember the first president I voted for was Ronald Reagan. He was a crafty one. It was us against the Russian and Ronny was an excellent poker player:

"We begin bombing in five minutes" is the last sentence of a controversial, off-the-record joke made by U.S. President Ronald Reagan in 1984, during the Cold War. While preparing for a scheduled radio address from his vacation home in California, Reagan joked with those present about outlawing and bombing Russia. The joke was not broadcast live, but was recorded and later leaked to the public. The Soviet Union criticized the joke, as did Reagan's opponent in the 1984 United States presidential election, Walter Mondale.

The rest of course is history......... As it turns out Russia is a paper bear.

 

[blueone]

The rest of course is history......... As it turns out Russia is a paper bear.

I doubt Crimea and Ukraine would see it that way. Perhaps "was a paper bear" would be more accurate.

 

[blueone]

Maybe Trump can turn things around with China?

"President-elect Donald Trump has invited China's President Xi Jinping to his inauguration in January, his spokesperson said Thursday."

I really like optimists. I wish I could be one. I'd sleep better. But I'm the sort who can find the dark side of the sun.

 

[Daniel Nenni]

I doubt Crimea and Ukraine would see it that way. Perhaps "was a paper bear" would be more accurate.

Yes, past tense, definitely.

Russia is one to be feared but the war in Ukraine is not a good look for Russia so maybe less feared than before.

Optimists don't sleep better, believe me. We do have more fun though.