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OM in the News: The Chips That Run the World JUNE 24, 2021 tags: chip production, global supply chains, semiconduxtors, TSMC by Barry Render Taiwan
OM in the News: The Chips That Run the World JUNE 24, 2021 tags: chip production, global supply chains, semiconduxtors, TSMC by Barry Render Taiwan Semiconductor Manufacturing Co.'s chips are everywhere, though most consumers don't know it. 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, PCs and carsall without any sign they came from TSMC. TSMC has emerged as the world's most important semiconductor company, with enormous influence over the global economy, writes The Wall Street Journal (June 19-20, 2021). With a market cap of around $550 billion, it is the world's 11th most valuable company. But its dominance leaves the world in a vulnerable position. As more technologies require chips of mind-boggling complexity, more are coming from this one company. A TSMC employee with a 8-inch wafer. It will be difficult for other manufacturers to catch up in an industry that requires hefty capital investments. And TSMC can't make enough chips to satisfy everyonea fact that has become even clearer amid a global shortage, adding to the chaos of supply bottlenecks, higher prices for consumers and furloughed workers. The situation is similar in some ways to the world's past reliance on Middle Eastern oil. It now makes around 92% of the world's most sophisticated chips, which have transistors that are less than 1/1,000 the width of a human hair. (Samsung makes the rest). Most of the 1.4 billion smartphone processors world-wide are made by TSMC. It also makes 60% of the less-sophisticated microcontrollers that car makers need. As carmaker after carmaker has idled production because of chip shortages, TSMC has little incentive to reallocate production. The less lucrative auto chips make up only around 4% of its revenues. TSMC's hard-driving culture and deep pockets make it hard to create a more diversified semiconductor supply chain. Once a chip producer falls behind, it's hard to catch up. Companies can spend billions of dollars and years trying, only to see the technological horizon recede further. A single semiconductor factory can cost $20 billion. One key manufacturing tool for advanced chip-making that imprints intricate circuit patterns on silicon costs $100 million. TSMC's own expansion plans call for spending $100 billion over the next 3 years. Classroom discussion questions: 1. Why are chips critical to the US economy? 2. What will need to be done for the US to be "semiconductor independent
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