During a speech at TSMC’s sports event, following a three-year break due to the pandemic, Chang reflected on his foresight expressed during the last TSMC sports event in 2019. He had predicted that TSMC would transform into a strategic battleground for global powers, and the events of the past four years have indeed validated his anticipation.
Chang elaborated on how the increased emphasis on national security has disrupted the landscape of globalization and free trade within the semiconductor industry. This shift has amplified TSMC’s importance for various countries. Furthermore, he pointed out that some competitors are actively attempting to capitalize on this opportunity to surpass TSMC.
1. Globalisation is Over
The year 2023 has proven to be a challenging period for TSMC, marked by a series of unfavorable developments. The chip sector has faced a slowdown, primarily due to an excess of supply in the personal computing market, resulting in a consistent drop in TSMC’s revenue almost every month this year. Consequently, the firm has revised its revenue projections downward twice to adapt to this deceleration.
In parallel, TSMC’s plans for a new chip manufacturing facility in the U.S. have encountered delays due to the complexities involved in setting up advanced equipment. Dr. Chang, expressing his longstanding aspiration to establish a chip plant in the U.S., noted that TSMC is now better equipped with funds, talent, and technology to turn this dream into a reality.
Dr. Chang, known for asserting the end of globalization, reiterated his stance, emphasizing that globalization within the semiconductor industry has indeed concluded. Countries are now prioritizing localized chip production to mitigate potential disruptions during conflicts. Despite these challenges, Dr. Chang expressed optimism, affirming TSMC’s capability to overcome current obstacles. He highlighted that one of the major threats faced by the company stems from global concerns regarding national security in the semiconductor supply chain.
Read More: Micron Unveils NVDRAM: Revolutionary DRAM-Like Non-Volatile Memory for AI
2. TSMC Will have tough days ahead despite its Advantages
TSMC holds a range of formidable advantages that present a challenge for its competitors to match.
Chang highlighted that TSMC’s past triumphs have been built on the pillars of providing ample production capacity, cost-effectiveness, and strong emphasis on research and development. He emphasized the importance of adhering to the present strategy to uphold its competitive edge as the leading global foundry. Simultaneously, he stressed the need to escalate investments in both production capacity and advancements in process technologies.
Chang said that TSMC’s robust partnerships with both customers and suppliers, along with its innovative Open Innovation Platform (OIP) that offers vital IPs to customers, making it difficult for competitors to replicate or outperform TSMC. Additionally, TSMC benefits from significant economies of scale in manufacturing, enabling substantial cost reductions through production scaling and the accumulation of invaluable experience.
Chang also observed and praised the dedication of Taiwanese engineers in promptly addressing equipment errors, often to the surprise of those from the US. This observation underscored the noticeable cultural differences in work culture between the two regions.
However, Chang issued a word of caution, expressing concern that a heightened focus on national security at the expense of globalization might potentially erode TSMC’s competitive advantage over the coming 20-30 years.
Chang expressed a cautionary note, stating that TSMC is poised to encounter heightened competition. This is due to rivals such as Intel capitalizing on the global trend where governments prioritize the development of chip manufacturing capabilities as a critical aspect of national security.
“In the semiconductor space, there is no globalization anymore; there is no free trade anymore. The priority is national security only. I see this global competition going on. Our competitors may take advantage of this geopolitical trend, and want to beat us.”
~Morris Chang, Founder, TSMC
Read More: 5 Reasons for Intel Decision to Spin-off Its PSG Unit
3. Prospective Semiconductor Hubs: A Global Outlook
Morris Chang outlined the global landscape of semiconductor supply chain development. He mentioned that numerous countries aspire to establish their semiconductor supply chains.
Specifically, Japan, with a spotlight on Kyushu, was highlighted due to its favorable conditions in terms of water, electricity, land, and work culture. Singapore also emerges as a contender, despite grappling with limitations in land, water, and electricity resources.
Chang also envisioned a future where Vietnam and India could potentially evolve into semiconductor hubs.
Read More: Intel to Start Mass EUV Production in Ireland; 2 Out of 5 nodes achieved
4. Intel will live in TSMC Shadow
Chang drew attention to the United States’ historical competitiveness in semiconductor manufacturing, aligning it with Taiwan until post-1972. Despite some loss in manufacturing advantages, the US remains relevant and doesn’t necessitate substantial capital expenditure for re-establishing its leadership.
He emphasized Intel’s advantage stemming from its “Made in the US” embodiment, supported by strong backing from the White House. This advantage gains significance if customers perceive no significant cost difference in placing orders with Intel in the US. Chang acknowledged Intel’s potential as a formidable competitor, contingent on delivering exceptional services, cutting-edge technology, high yield rates, and competitive pricing. However, he remained cautious, recognizing that achieving all these conditions is not guaranteed.
Chang emphasized that while Intel enjoys substantial support and endorsement from the U.S. government, it does not present a significant challenge to TSMC unless it improves critical aspects of its foundry operations such as technological advancement, yield rates, and competitive pricing. He went on to state that even if Intel Foundry Services achieves success, it will remain overshadowed by TSMC, according to Chang’s assessment.
Read More: 5 Key Announcements From Intel Innovation Day
Chang concluded by expressing his aspirations for TSMC, particularly the dream of operating a wafer fab in the US. He highlighted TSMC’s evolution and preparedness to adapt to changing circumstances and solidify its position in the global semiconductor manufacturing ecosystem. Chang encouraged TSMC to continue its current strategy while placing a heightened focus on bolstering investments in both production capacity and advancements in process technologies.
