On May 12th Tim Culpan, a Bloomberg columnist, wrote an analysis that TSMC may have to give in to the US, make large-scale investments and build factories in the US. Here’s the main story: TSMC is in an enviable position and a key supplier to China and the United States.
It makes the world’s most advanced chips for companies such as Apple, Qualcomm, Nvidia and Huawei. Although it does not want to offend anyone. Now, however, the US is pressing it to make a choice.
As the White House, The Pentagon and the Commerce Department have described it, America’s fear is that allowing China to buy the world’s best semiconductors, but the United States cannot produce at home, is an urgent and critical national security threat. In recent years, this has prompted the United States to implement a two-pronged strategy of limiting China’s access to and development of chip technology while increasing domestic power.
TSMC’s strategy has always been to remain neutral. Most of its production capacity is in Taiwan, China, in addition to a new and not-so-new plant in mainland China, and an old plant in Washington, D.C. A year ago, TSMC Chairman Liu Deyin politely refused a request to build a factory in the United States, citing huge costs. “TSMC cannot remain neutral forever, ” says Mr Kulpan. Although Liu Deyin may only want to make chips, he eventually had to make a choice. “
The day has come.
As the Wall Street Journal reported over the weekend, the new coronavirus pandemic highlights the need for Washington to protect its supply chain from disruption. To that end, the Wall Street Journal reported that the U.S. government is working to get chipmakers, including Intel, TSMC and Samsung Electronics, to build plants in the U.S. so that the U.S. can use its best technology.
Unsurprisingly, Intel makes the case that the United States should strengthen its domestic manufacturing capabilities. Most of the company’s employees and more than half of its plants and equipment are in the U.S., in Arizona, New Mexico and Oregon.
Intel’s main business is to provide chips for PCs and servers, but it also operates a chip contract company that designs its own chips to provide contract production. Intel was once a leader in chip production, but is now fully owned by TSMC and South Korea’s Samsung Electronics.
Intel clearly sees an opportunity. If it can persuade Defense Department and Commerce Department officials to be authorized to produce some chips in the U.S. on national security grounds, it could have a chance to bring its chip foundry business back to life.
TSMC has been trying to back down, or at least gain a favorable position in policy discussions. It recently hired Peter Cleveland, a former Intel lobbyist, to help coordinate with Washington.
But another goal of the U.S. strategy may be harder to deal with for TSMc. In addition to expanding domestic production capacity, Washington wants to restrict China’s access. To do so, the Trump administration is considering new rules to limit the use of U.S. devices and materials to make chips for companies such as Huawei.
This puts TSMC and many other companies in a difficult position. Last year, 59% of TSMC’s sales came from the United States and 19% from China. TSMC is trying to play a neutral role. A year ago, the company came up with the idea that “we are everyone’s surrogated factory”.
Washington is increasingly looking to TSMC as its proprietary chip foundry. Over the past year, the pressure has increased significantly, as the long list of U.S. customers and the large amount of revenue contributed have become a powerful lasso that suggests that the U.S. is a party of TSMC’s choice.
China remains an important and growing market, attracting companies from all over the world to invest in the country. But in order to allay U.S. concerns and avoid sanctions for supplying products to China, TSMC has no choice but to comply with the U.S.
After years of procrastination and resistance, it is time for TSMC to build a new plant in the United States. TSMC is expected to announce specific plans for investment in the U.S. and huge investment figures around next year.