There is no doubt about it: Taiwan Semiconductor has emerged as the world's most important chipmaker.
And now, in the midst of a global semiconductor shortage, it is becoming clear exactly how important the company's dominance has been.
Not only has TSMC made headlines for proposing to expand production into the United States, as we have documented numerous times, but now it is making headlines for how it has become the center of the semiconductor world - and how that can leave the world vulnerable.
TSMC's chips are in "billion of products", including iPhones, computers and cars, the Wall Street Journal writes in a new profile of the company. The company has slowly become the world's 11th most valuable company, with a market cap of about $550 billion. The company reported $17.6 billion in profits last year on revenues of about $45.5 billion. TSMC makes "around 92% of the world's most sophisticated chips," the report says.
This has led to the U.S., Europe and China looking to cut their reliance on chips out of the Taiwanese company. But that's a tough task given its contribution globally. The U.S., for example, only accounts for 12% of the world's chip manufacturing, down from 37% in 1990.
Analysts aren't confident of there being a more diversified semiconductor supply chain "anytime soon". They attribute this to TSMC's "hard driving culture" and "deep pockets". The industry has become so complex that once one producer falls behind, it becomes tough to catch up.
And it's going to be even tougher for competition to catch up if TSMC starts to expand in the U.S. After years of investing in R&D since the company's founding in 1987, TSMC finally "broke through" when it started to mass produce chips for mobile phones for Apple:
"A pivotal moment came in 2013, when TSMC began work on mass-producing mobile phone chips for Apple, now its biggest customer. Before that, Samsung—which had its own smartphones—had been the exclusive microprocessor supplier for iPhones.
To fulfill Apple’s first order, TSMC spent $9 billion, with 6,000 people working around the clock to build a fab in Taiwan in a record 11 months. TSMC is now the exclusive supplier for the main processors in iPhones."
Less than a decade later, and barely 30 years after its founding, TSMC is the dominant force in the global semiconductor world.
At the beginning of May, we noted that Taiwan Semiconductor was considering bolstering its production in the U.S., and that President Biden's Commerce Secretary was urging more domestic production. Now, it looks like TSMC could be within striking distance of a serious U.S. expansion.
We also reported last month that TSMC is "weighing plans to pump tens of billions of dollars more into cutting-edge chip factories in the U.S. state of Arizona than it had previously disclosed", a Reuters exclusive revealed.
The company had already said it was going to invest $10 billion to $12 billion in Arizona. Now, the company is mulling a more advanced 3 nanometer plant that could cost between $23 billion and $25 billion, sources said. The changes would come over the next 10 to 15 years, as the company builds out its Phoenix campus, the report notes.
The move would put TSMC in direct competition with Intel and Samsung for subsidies from the U.S. government. President Joe Biden has proposed $50 billion in funding for domestic chip manufacturing - a proposal the Senate could act on as soon as this week. Intel has also committed to two new fabs in Arizona and Samsung is planning a $17 billion factory in Austin, Texas.
TSMC CEO C.C. Wei said on a call last month: "But in fact, we have acquired a large piece of land in Arizona to provide flexibility. So further expansion is possible, but we will ramp up to Phase 1 first, then based on the operation efficiency and cost economics and also the customers' demand, to decide what the next steps we are going to do."
TSMC has also said that talks in Europe regarding expansion have gone "very poorly", increasing the likelihood that the chip giant will be focused more on the U.S.
There are no plans for a plant in Europe, a TSMC spokesperson said.