A $65 Billion Unprofitable Monopoly

[cxy11]

Good Evening from Taipei,

This year’s two biggest tech stories will set the tone for 2025. The first is the continued rise of generative AI, and the escalating costs & challenges of building and delivering those models. The second is the struggles and doubts about the future of America’s pioneering chipmaker, Intel.

At the intersection of these two developments is TSMC. The Taiwanese company is the key enabler of AI through its advanced chip manufacturing, and the largest threat to Intel’s survival.

A $65 Billion Unprofitable Monopoly

[Opinion] America's most-advanced semiconductor fabs will remain underwater into the 2030s while remaining the only game in town

timculpan.substack.com

 

[hist78]

Good Evening from Taipei,

This year’s two biggest tech stories will set the tone for 2025. The first is the continued rise of generative AI, and the escalating costs & challenges of building and delivering those models. The second is the struggles and doubts about the future of America’s pioneering chipmaker, Intel.

At the intersection of these two developments is TSMC. The Taiwanese company is the key enabler of AI through its advanced chip manufacturing, and the largest threat to Intel’s survival.

A $65 Billion Unprofitable Monopoly

[Opinion] America's most-advanced semiconductor fabs will remain underwater into the 2030s while remaining the only game in town

timculpan.substack.com

This is an interesting article. One thing the author may need to explore or clarify is the legal definition of the monopoly and what illegal monopoly behaviors that governments around the globe are really going after. Otherwise his conclusion about TSMC's monopoly and the potential legal troubles will not make sense at all.

For example, Japan, Germany/EU, and US governments are all giving billions of money to TSMC to build fabs in their own territories. Are those governments coming back in 5 to 10 years to accuse TSMC as a bad bad monopoly? So those governments can happily destroy their own billions of investment?

I remember EU's Chips Act and Germany-TSMC subsidies were all approved by the EU's antitrust commission. Monopoly and illegal monopoly behaviors are much complicated than most people perceived.

 

[tooLongInEDA]

This is an interesting article. One thing the author may need to explore or clarify is the legal definition of the monopoly and what illegal monopoly behaviors that governments around the globe are really going after. Otherwise his conclusion about TSMC's monopoly and the potential legal troubles will not make sense at all.

For example, Japan, Germany/EU, and US governments are all giving billions of money to TSMC to build fabs in their own territories. Are those governments coming back in 5 to 10 years to accuse TSMC as a bad bad monopoly? So those governments can happily destroy their own billions of investment?

I remember EU's Chips Act and Germany-TSMC subsides were all approved by the EU's antitrust commission. Monopoly and illegal monopoly behaviors are much complicated than most people perceived.

The whole article seems to be built on sand with little actual understanding of monopoly law and practice. The hazards of using undefined terms ...

Having an effective monopoly is not in itself a crime in most countries. It is the abuse of that power or illegal activity in creating it that is.

And I have yet to see the actual evidence of any such abuse in TSMC's case.

Is maintaining stable gross margins ataround 53% excessive ? Is this actually bad for its customers ? It's quite arguably good as it allows TSMC to reliably invest in very expensive and risky new process technologies.

Is doubling wafer prices over the past 6 years (cited in the article) actually unreasonable, given a) the increasing costs of the newer technologies, b) generally high inflation over this period, c) Covid disruptions and d) less competition ? The supply:demand balance may also have shifted to increase prices.

Where is there any evidence of anti-competitive behaviour by TSMC ? Or conspiracies to distort market behaviour ? Where are the actual lawsuits from UMC, Intel, GF and co about this ? Or complaints from TSMC's customers ?

 

[siliconbruh999]

Correct Monopoly doesn't itself is a issues it's the abuse that's the issues

 

[Maximus]

The whole article seems to be built on sand with little actual understanding of monopoly law and practice. The hazards of using undefined terms ...

Having an effective monopoly is not in itself a crime in most countries. It is the abuse of that power or illegal activity in creating it that is.

And I have yet to see the actual evidence of any such abuse in TSMC's case.

Is maintaining stable gross margins ataround 53% excessive ? Is this actually bad for its customers ? It's quite arguably good as it allows TSMC to reliably invest in very expensive and risky new process technologies.

Is doubling wafer prices over the past 6 years (cited in the article) actually unreasonable, given a) the increasing costs of the newer technologies, b) generally high inflation over this period, c) Covid disruptions and d) less competition ? The supply:demand balance may also have shifted to increase prices.

Where is there any evidence of anti-competitive behaviour by TSMC ? Or conspiracies to distort market behaviour ? Where are the actual lawsuits from UMC, Intel, GF and co about this ? Or complaints from TSMC's customers ?

Returning to TSMC's core principle: 'Everyone's foundry' and 'customers' success is our success.'

I believe TSMC has invested significant effort in discussing pricing with customers. At one event, Morris Chang spoke about the art of pricing and humorously noted that if CC Wei were present, he would be eager to join the pricing discussion. This indicates that TSMC's leadership is deeply committed to establishing fair prices.

 

[VCT]

Imagine sliptting Space X, the progress of the industry will not speed up but slow down.
The same as if we split up TSMC, customers like nvidia and Apple will not benefit from that. Chinese competitors could catch up nvidia and Apple.

 

[hkwint]

It's a one of the most clueless articles I've ever seen. And I'm a mechanical engineer, so well.... I can only imagine how much problems a legal person would find....

First, the article fails to take cultural linguistic differences in account; "monopolies" are _only_ forbidden in US English language; but not in English language. Where I live, a monopoly doesn't imply "a felony", while in US English, it does. Stricter speaking, it should be called "coercive monopoly" which is forbidden, but that nuance usually gets lost...

Second of all; if you actually read the Sherman Act, which takes you exactly 2 minutes, you see that's what's a felony, is a contract which in some way hampers those in the US; so it's besides the point whether TSMC has factories in the US or not.

Third, it doesn;t look to context; ASML has the same profit margin as TSMC (and so did ARM in the past), and no US company ever complained much. And the profits or losses of course have _no relation_ with any violiatons as mentioned within the Sherman act article 1 and 2.

Fourth, the article assumes if Intel fab is succesfull, TSMC cannot be accused of monopoly abuse. That's wrong, because every company who has pricing power (in my jurisdiction this could already if you have more than 30% market share), you can still be accused of anti-competitive behavior.

Fifth, what TSCM does or does not address as TAM is not related to being anti-competetive in any way.

Sixth, it seems to assume in the end that things are related to politics, but that's not the way it works; or at least not the way it should work.
A US company which feels it's victim of anti-competitive behavoir files a complaint with the FTC or DJI, usually the government is no party in this conflict.

Seventh, it seems to assume that there's actually a result if a company is found guilty of anti competitive behavoir. Examining the matter however, one sees that even after being found guilty, Intel, for example, after more than 10 years of legal battles, didn't have to pay a single Euro fine after their anti-competitive breaking of the law. So _if_ a TSMC client or competitor ever raises a complaint, nothing will happen within the next 10 years; except for some lawyers buying the quickest Lucid's and some castles here and there.

Eight, the article seems to imply that US regulators should abuse monopoly law for political gain. Of course, that's not unthinkable giving the incoming US administration, however, it doesn't take into account any retaliatory measures which could be taken by TSMC or Taiwan. It's the US (nVidia, Qualcomm) which needs Taiwan and the Netherlands, and (apart of some EUV source which could be swapped for Gigaphoton) not the other way around. Because the Taiwanese and Dutch (and German and Japanese) could easily sell to the Chinese instead of the US; the Chinese will be happy to fill the demand gap.