Global Single Point of Failure?
We are not talking about Supply Chain choke points, we are pointing out the one (1), Chip manufacturer that has the world waiting... for its chips.
Who am I talking about? TSMC - AKA Taiwan Semiconductor Manufacturing Co, yes, their chips are used in just about everything today (Auto/trucks, Mobile phones, computers, networking gear etc.) The pandemic put a huge hit in chip production last year and as the global economy started opening up they were snapping up new gear (Consumer and Enterprise gear) and thus depleting chip supply. TSMC has been working extra hard to keep up but the supply is constrained globally.
What do you know about TSMC? The company is the world's 11th most valuable company, with a market cap of about $550 billion. How did they do that? They make 92% of the worlds sophisticated chip sets! Leading through innovation! And they are the lead chip in the Apple iPhone
What happens if China invades Taiwan? All the chips you are waiting on are gone, never to be shipped! You think lead times are bad now? Try never getting the components to complete your product? How far off from reality is this invasion? I don't have vision to see into the future, I don't see Taiwan staying independent through the end of this decade; just my gut. Even IF a global coalition is put together to repel China from Taiwan, how much destruction of culture, infrastructure would take place during that time frame assume a minimum of 6-8 months. Nor, do I see China just allowing exports to the coalition that would be against it!
What about the TSMC Arizona plant? TSMC has funded a new chip plant in to the tune of $10-$12B. However, it is not something that will be built overnight! This is a 2-4 year effort for Phase I. TSMC has plans for an entire campus in the Phoenix area for future expansion Phase II etc. Have you ever seen IT Campus go bust? I have, I saw first hand two of the largest IT campuses walked away from for years, nothing I expected to witness.
Why can't Intel just fill the void? The last I heard, Intel was 2-3 years behind TSMC current chips; ouch. An added bonus, the US chip manufacturing is down to only 12% of the global chips vs 1990's where we had 37%. So, not an easy hurdle to overcome. Sure through American Ingenuity it is possible it just takes time! Anyone have a couple of Trillion I can borrow to source a new chip fab in the West?
What about AMD? Well, have they decided to stay in the Enterprise market long enough to have a plan to compete here? If yes, I have not seen it.
What about the US Government subsidy to support domestic chip manufacturing? True the U.S. government called for $50 billion funding to support domestic chip manufacturing, and the U.S. Senate could take action soon; as glacier movement slow. Recall it takes several years just to get a fab up and running and how will you address skills shortage? Ever worked in a clean room? Ever worked with something only 7nm? Imagine the QA rules for that chip wafer!
What is next for TSMC? They are following IBM w/ an announcement of a 3nm chip. This chip brings more upgrades and upfront costs as well. TSMC has not announced plans for chip manufacturing in the EU so this doesn't help matters in regard to delivery.
Summary - Who in their right mind would not seek another provider instead of sole sourcing anything (Chips, boards, whatever) no economy ever survived being myopic to this degree. Don't get me wrong I know enough that you can't regulate this issue away only through investment of Capital and time can you achieve this; kudos to TSMC. This scenario could go to either end of the pendulum! Just saying, Analog anyone? Stay Classy!
