by Mish Shedlock, The Street:
Apple, Qualcomm, and Intel design chips, but when it comes to making them, the World Relies on One Chip Maker in Taiwan, Leaving Everyone Vulnerable.
Taiwan Semiconductor Manufacturing Co. TSM’s chips are everywhere, though most consumers don’t know it.
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The company makes almost all of the world’s most sophisticated chips, and many of the simpler ones, too. They’re in billions of products with built-in electronics, including iPhones, personal computers and cars—all without any obvious sign they came from TSMC, which does the manufacturing for better-known companies that design them, like Apple Inc. and Qualcomm Inc.
Its technology is so advanced, Capital Economics said, that it now makes around 92% of the world’s most sophisticated chips, which have transistors that are less than one-thousandth the width of a human hair. Samsung Electronics Co. makes the rest. Most of the roughly 1.4 billion smartphone processors world-wide are made by TSMC.
While the U.S. still leads the world in chip design and intellectual property with homegrown giants like Intel Corp. , Nvidia Corp. and Qualcomm, it now accounts for only 12% of the world’s chip manufacturing, down from 37% in 1990, according to Boston Consulting Group.
Other countries would need to spend at least $30 billion a year for a minimum of five years “to have any reasonable chance of success” in catching up with TSMC and Samsung, wrote IC Insights, a research firm, in a recent report.
Dimitris Dotis, the Audi brand specialist at Audi Tysons Corner dealership in Virginia, summed up the situation to customers. “Almost all microchips that go into all new vehicles including Audi come from TSMC in Taiwan,” he wrote. “They expect bottlenecks in the supply chain to last through 2022.”
TSMC Eyes Expansion in Arizona
Trump promised TSMC $3 billion in incentives to build a factory in Arizona, but no funding was allocated.
The newest chip designs will still be made in Taiwan.
Reuters reports Chipmaker TSMC Eyeing Expansion of Planned Arizona Plant.
Taiwan Semiconductor Manufacturing Co Ltd is planning to build several more chipmaking factories in the U.S. state of Arizona beyond the one currently planned, three people familiar with the matter told Reuters.
TSMC, the world’s largest contract chipmaker, announced in May 2020 it would build a $12 billion factory in Arizona, an apparent win by the Trump administration in its push to wrestle global tech supply chains back from China.
TSMC manufactures the bulk of its chips in Taiwan and has older chip facilities in China and the U.S. state of Washington.
The initial fab is relatively modest by industry standards, with a planned output of 20,000 wafers – each of which contains thousands of chips – every month using the company’s most sophisticated 5 nanometre semiconductor manufacturing technology.
The Biden administration is preparing to spend tens of billions of dollars to support domestic chip manufacturing. Under existing legislation, foreign firms are eligible for those funds, but whether they will ultimately receive it is an open question.
The Reuters article sounds great but 2024 is 2.5 to 3.5 years away depending on the month deployed.
By then, analysts expect TSMC to be building 3 nanometre chips, not in the US, but Taiwan.
Effectively, Taiwan is getting cheap land in the US to build what will likely be second-tier chips.
Auto Chip Shortage
Meanwhile, US automakers are running short of chips, but guess what? In the Covid pandemic, the automakers cut orders and now want to be in front of the line.
TSMC isn’t bumping orders and that’s another reason certain models are hard to find. Global News Canada comments on the Chip Shortage.
Automakers around the world have been forced to halt or slow down production thanks to a global shortage of semiconductor chips.
“Normally, we would have 225 to 250 pickup trucks stocked at all times because we have both Chevrolet and GMC brands, and there’s been many times in the last six months we’ve been down to three or four,” said Peter Heppner, owner of the Preston Chevrolet Buick GMC Cadillac dealership in Langley, B.C.
According to Statistics Canada, the Canadian auto industry has been impacted by the shortage since January, but worsened in April as every major auto manufacturer had to stop or slow down production.
“In some cases, it’s meant manufacturers are building vehicles without the chips, storing them on site until they are able to resolve that issue. Some manufacturers are postponing the introduction of models,” said Blair Qualey, president of the New Car Dealers Association of BC.
“Used cars are like real estate right now. There are cars that are selling for grossly higher amounts – 25, 30 per cent, 40 per cent more than they would have sold at the same time a year and a half ago.”