What’s at stake:
It’s not just that TSMC’s competitors cannot match the Taiwanese foundry in revenue, production volume or leading-edge technology, they are even unable to mount a spirited defense. TSMC’s overwhelming dominance could be a problem with anti-trust investigators. Yet, the company cannot dial back its technology innovations or on its commitment to customers just to let rivals catch up. Still, it may be in TSMC’s long-term interest to help foster the growth of a more competitive, viable and vibrant foundry landscape.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) dominates the foundry business so thoroughly its overwhelming sales position and technology leadership have spawned challenges and anti-trust speculations it is racing to terminate before they mushroom into a full-blown crisis.
Anti-monopoly investigators are reportedly sniffing around the company with one question in mind: Has the Taiwanese foundry become so big and such a threat to the supply chain that it must be reined in?
TSMC executives say they do not see anti-trust issues or investigations in their future but speculations that the US may open investigations into the company persist, with one analyst telling the company during its recent quarterly conference call that the investment community is a “little bit concerned.”
That’s partly because the competitive landscape is in tatters. The enterprises that should be giving TSMC a run for its money are themselves struggling either with multi-year restructuring programs or have given up on ever catching up in leading-edge process technologies. In this climate, it is not surprising that speculators are seeing a monopoly business in TSMC, a charge the company has tried to tamp down.
TSMC is not ignoring the monopoly allegation. It is responding quietly but firmly and the defense it is staging is ingenious.
After years of trumpeting its dominance of the pureplay foundry business, Hsinchu, Taiwan-based TSMC is singing a different tune. In essence, it is redefining its total available market (TAM) and using this to claim a much lower market share. It has also expanded the universe of companies it competes with beyond the traditional contract chipmaker business. The group now include many of its customers, including IDMs which have internal packaging, test and assembly as well as mask-making operations.
“Antitrust, meaning that TSMC has a very high market share and some unnecessary competition methodology,” queried CC. Wei, chairman and CEO of TSMC while responding to questions about the company’s latest financial results? “All my competitors are IDMs who also have packaging, testing, and mask-making services. Foundry 2.0 better reflects TSMC’s addressable market, and our share is probably around 30 percent.”
TSMC’s claim is that it is far from being able to establish a monopoly role in the foundry business. “We are big, yes, because we perform, but there no antitrust concern,” Wei said. “It’s not in our picture.”
Turmoil in foundry market
Will anti-trust regulators accept TSMC’s argument?
This depends on many factors. No regulatory organization in America, China, EU, Korea, Taiwan or anywhere else is known to have launched investigations into or even hinted that they are concerned about TSMC’s market position. TSMC itself says it is not aware of any anti-trust investigations into its operations.
So, why are there anti-monopoly speculations about TSMC and what is the source of the accusation? Could it be coming from observers’ reading of the competitive landscape?
It appears analysts are pointing at the messy competitive landscape in the foundry business. Notwithstanding TSMC’s protestations, the company is still the dominant player in the pureplay foundry market. TrendForce estimated TSMC’s market share at approximately 62 percent at the beginning of the year although this may have since declined a couple of percentage points. Still, the company remains a major player in the market and continues to post double-digit revenue growth.
TSMC’s competitors are facing stiff sales and technology headwinds, though. Samsung, its closest competitor with a market share of about 11 percent, is fighting to keep up in process technology. The company has reported yield issues on its 3nm process and has pushed out the completion date on fabs it is constructing in both Korea and Taylor, Texas. Earlier this month, Samsung executives issued an apology about its performance as concerns grew that it was falling further behind TSMC.
“We have caused concerns about our fundamental technological competitiveness and the future of the company due to our performance falling short of the market’s expectations,” said Jun Young-hyun, head of Samsung Electronics device solutions business, in a statement. “We will restore our fundamental technological competitiveness. Rather than short-term solutions, we will secure fundamental competitiveness.”
Samsung’s struggles are not unique to the company. GlobalFoundries, too, has essentially given up on competing at the leading-edge level with TSMC. Other competitors in TrendForce’s Top 10 Foundry Ranking, including SMIC, UMC, HuaHong Group, Tower, PSMC, Nexchip and VIS, are so far back in market share that it is unlikely that anyone of them can mount an offense against TSMC anytime soon. Plus, stringent Western governments sanctions have had a crippling effect on China-based foundries, shutting off their access to advanced semiconductor manufacturing equipment.
Intel Corp., the only other company whose foundry business could possibly challenge TSMC, is itself struggling and now depends on the Taiwanese rival to produce its most advanced chips. Years into its turnaround program, Intel is still trying to convince a skeptical customer base to use the services of its foundry operation.
The failure of the competition poses a challenge to TSMC. The anti-trust speculations it faces may find fertile grounds in the absence of a viable competitor. Without a strong rival, TSMC will have to hope regulators accept its redefined TAM or rule that the company has done everything by the book and should not be punished for the failure of other players.
Unknowns
TSMC may have other pressing concerns, though.
Geopolitical developments have compounded the challenges facing the company. So many countries and regional authorities are interested in its affairs that its fab construction decisions are being closely watched both in Taiwan and overseas.
In addition to customers wary about the location of most of its fabs in Taiwan – an issue TSMC has begun addressing by building fabs overseas – governments worried about China and the security of the supply chain have waded into its affairs.
Will the company ever succeed in satisfying all these audiences?
Within the next five to 10 years, TSMC may have more fabs overseas than in Taiwan. If Western governments have their way, most of the new fabs will be leading edge plants serving fabless chip manufacturers in Europe, North America, parts of Asia outside China, the Middle East and possibly in India.
Where TSMC will run into further roadblocks will be in the defense and military areas. Will the U.S. Department of Defense, for example, trust TSMC to handle sensitive chips even in North American fabs? Only the US administration can answer this question, but, the issue will continue to hang over TSMC for years and as long as distrust persists over China’s intentions over Taiwan.
Also, if China were to invade Taiwan, a nationalization of TSMC’s assets and fabrication facilities in Western nations would most likely be one of the first actions their governments will take.
Such a move will blindside TSMS’s leadership. They should not be shocked if it happens, though. Successive American administrations over almost the last decade have raised questions about the security of the chip supply chain. This is because American OEMs, IDMs and fabless suppliers make up the bulk of TSMC’s customers. AMD, Apple, Broadcom, Intel, MediaTek, Nvidia and Qualcomm are the company’s top customers – ordered chronologically.
Only one of them – MediaTek – is headquartered in Taiwan. The rest are all US-based entities subject to American laws and government dictates. Apple alone accounted for one-quarter of the foundry’s sales in 2023 with Nvidia coming in second place. At its current growth pace, Nvidia may overtake Apple as TSMC’s biggest customer soon.
An attack on Taiwan by China or supply disruptions could spur a new American president to initiate the nationalization of TSMC via Executive Order, which has been used in recent times to curb China’s access to American technology and devices.
Such an action will not be flippantly taken, but it may be considered necessary as China-US spats over Taiwan and access to leading-edge semiconductor innovations, manufacturing equipment and markets raise the temperature of discussions between the two countries. We already see signs that America’s fabless chipmakers have become sensitized to the geopolitics of the Asia-Pacific region and China’s forceful role in the area.
A viable and successful Intel Foundry Services could help reduce the pressure on TSMC, at least in the United States.
That’s why from TSMC’s position, today, nothing could be better than having a vibrant group of rivals able to match it on every level, including in leading-edge production.
For now, though, the foundry business has one undisputed King. And it is undoubtedly TSMC. Whether it qualifies as a monopoly is a question the company would prefer not raised.
Bottom line:
TSMC has slipped into a conundrum. Matching or even displacing the company in the foundry business will be tough, and unlikely with the current state of the competition. While the No. 1 global foundry will want to keep its crown, it is also in its best interest for the sector to have a strong line of competitors, which will help keep regulators’ eyes off TSMC.
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It’s not just that TSMC’s competitors cannot match the Taiwanese foundry in revenue, production volume or leading-edge technology, they are even unable to mount a spirited defense. TSMC’s overwhelming dominance could be a problem with anti-trust investigators. Yet, the company cannot dial back its technology innovations or on its commitment to customers just to let rivals catch up. Still, it may be in TSMC’s long-term interest to help foster the growth of a more competitive, viable and vibrant foundry landscape.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) dominates the foundry business so thoroughly its overwhelming sales position and technology leadership have spawned challenges and anti-trust speculations it is racing to terminate before they mushroom into a full-blown crisis.
Anti-monopoly investigators are reportedly sniffing around the company with one question in mind: Has the Taiwanese foundry become so big and such a threat to the supply chain that it must be reined in?
TSMC executives say they do not see anti-trust issues or investigations in their future but speculations that the US may open investigations into the company persist, with one analyst telling the company during its recent quarterly conference call that the investment community is a “little bit concerned.”
That’s partly because the competitive landscape is in tatters. The enterprises that should be giving TSMC a run for its money are themselves struggling either with multi-year restructuring programs or have given up on ever catching up in leading-edge process technologies. In this climate, it is not surprising that speculators are seeing a monopoly business in TSMC, a charge the company has tried to tamp down.
TSMC is not ignoring the monopoly allegation. It is responding quietly but firmly and the defense it is staging is ingenious.
After years of trumpeting its dominance of the pureplay foundry business, Hsinchu, Taiwan-based TSMC is singing a different tune. In essence, it is redefining its total available market (TAM) and using this to claim a much lower market share. It has also expanded the universe of companies it competes with beyond the traditional contract chipmaker business. The group now include many of its customers, including IDMs which have internal packaging, test and assembly as well as mask-making operations.
“Antitrust, meaning that TSMC has a very high market share and some unnecessary competition methodology,” queried CC. Wei, chairman and CEO of TSMC while responding to questions about the company’s latest financial results? “All my competitors are IDMs who also have packaging, testing, and mask-making services. Foundry 2.0 better reflects TSMC’s addressable market, and our share is probably around 30 percent.”
TSMC’s claim is that it is far from being able to establish a monopoly role in the foundry business. “We are big, yes, because we perform, but there no antitrust concern,” Wei said. “It’s not in our picture.”
Turmoil in foundry market
Will anti-trust regulators accept TSMC’s argument?
This depends on many factors. No regulatory organization in America, China, EU, Korea, Taiwan or anywhere else is known to have launched investigations into or even hinted that they are concerned about TSMC’s market position. TSMC itself says it is not aware of any anti-trust investigations into its operations.
So, why are there anti-monopoly speculations about TSMC and what is the source of the accusation? Could it be coming from observers’ reading of the competitive landscape?
It appears analysts are pointing at the messy competitive landscape in the foundry business. Notwithstanding TSMC’s protestations, the company is still the dominant player in the pureplay foundry market. TrendForce estimated TSMC’s market share at approximately 62 percent at the beginning of the year although this may have since declined a couple of percentage points. Still, the company remains a major player in the market and continues to post double-digit revenue growth.
TSMC’s competitors are facing stiff sales and technology headwinds, though. Samsung, its closest competitor with a market share of about 11 percent, is fighting to keep up in process technology. The company has reported yield issues on its 3nm process and has pushed out the completion date on fabs it is constructing in both Korea and Taylor, Texas. Earlier this month, Samsung executives issued an apology about its performance as concerns grew that it was falling further behind TSMC.
“We have caused concerns about our fundamental technological competitiveness and the future of the company due to our performance falling short of the market’s expectations,” said Jun Young-hyun, head of Samsung Electronics device solutions business, in a statement. “We will restore our fundamental technological competitiveness. Rather than short-term solutions, we will secure fundamental competitiveness.”
Samsung’s struggles are not unique to the company. GlobalFoundries, too, has essentially given up on competing at the leading-edge level with TSMC. Other competitors in TrendForce’s Top 10 Foundry Ranking, including SMIC, UMC, HuaHong Group, Tower, PSMC, Nexchip and VIS, are so far back in market share that it is unlikely that anyone of them can mount an offense against TSMC anytime soon. Plus, stringent Western governments sanctions have had a crippling effect on China-based foundries, shutting off their access to advanced semiconductor manufacturing equipment.
Intel Corp., the only other company whose foundry business could possibly challenge TSMC, is itself struggling and now depends on the Taiwanese rival to produce its most advanced chips. Years into its turnaround program, Intel is still trying to convince a skeptical customer base to use the services of its foundry operation.
The failure of the competition poses a challenge to TSMC. The anti-trust speculations it faces may find fertile grounds in the absence of a viable competitor. Without a strong rival, TSMC will have to hope regulators accept its redefined TAM or rule that the company has done everything by the book and should not be punished for the failure of other players.
Unknowns
TSMC may have other pressing concerns, though.
Geopolitical developments have compounded the challenges facing the company. So many countries and regional authorities are interested in its affairs that its fab construction decisions are being closely watched both in Taiwan and overseas.
In addition to customers wary about the location of most of its fabs in Taiwan – an issue TSMC has begun addressing by building fabs overseas – governments worried about China and the security of the supply chain have waded into its affairs.
Will the company ever succeed in satisfying all these audiences?
Within the next five to 10 years, TSMC may have more fabs overseas than in Taiwan. If Western governments have their way, most of the new fabs will be leading edge plants serving fabless chip manufacturers in Europe, North America, parts of Asia outside China, the Middle East and possibly in India.
Where TSMC will run into further roadblocks will be in the defense and military areas. Will the U.S. Department of Defense, for example, trust TSMC to handle sensitive chips even in North American fabs? Only the US administration can answer this question, but, the issue will continue to hang over TSMC for years and as long as distrust persists over China’s intentions over Taiwan.
Also, if China were to invade Taiwan, a nationalization of TSMC’s assets and fabrication facilities in Western nations would most likely be one of the first actions their governments will take.
Such a move will blindside TSMS’s leadership. They should not be shocked if it happens, though. Successive American administrations over almost the last decade have raised questions about the security of the chip supply chain. This is because American OEMs, IDMs and fabless suppliers make up the bulk of TSMC’s customers. AMD, Apple, Broadcom, Intel, MediaTek, Nvidia and Qualcomm are the company’s top customers – ordered chronologically.
Only one of them – MediaTek – is headquartered in Taiwan. The rest are all US-based entities subject to American laws and government dictates. Apple alone accounted for one-quarter of the foundry’s sales in 2023 with Nvidia coming in second place. At its current growth pace, Nvidia may overtake Apple as TSMC’s biggest customer soon.
An attack on Taiwan by China or supply disruptions could spur a new American president to initiate the nationalization of TSMC via Executive Order, which has been used in recent times to curb China’s access to American technology and devices.
Such an action will not be flippantly taken, but it may be considered necessary as China-US spats over Taiwan and access to leading-edge semiconductor innovations, manufacturing equipment and markets raise the temperature of discussions between the two countries. We already see signs that America’s fabless chipmakers have become sensitized to the geopolitics of the Asia-Pacific region and China’s forceful role in the area.
A viable and successful Intel Foundry Services could help reduce the pressure on TSMC, at least in the United States.
That’s why from TSMC’s position, today, nothing could be better than having a vibrant group of rivals able to match it on every level, including in leading-edge production.
For now, though, the foundry business has one undisputed King. And it is undoubtedly TSMC. Whether it qualifies as a monopoly is a question the company would prefer not raised.
Bottom line:
TSMC has slipped into a conundrum. Matching or even displacing the company in the foundry business will be tough, and unlikely with the current state of the competition. While the No. 1 global foundry will want to keep its crown, it is also in its best interest for the sector to have a strong line of competitors, which will help keep regulators’ eyes off TSMC.
TSMC Won the Foundry War. Now the Fallout Begins | The Ojo-Yoshida Report
The company that won the foundry war finds itself with no close competitor and the opposition in disarray. Will TSMC have to help its rivals become competitive to fend off anti-trust regulators and avoid pressure from Western governments?
ojoyoshidareport.com
