The second in our series of blogs looking at pressures on the industry of the chip shortage discusses what we see happening in the chip manufacturing (wafer fabs) industry, in particular. This is an industry traditionally dominated by a small number of players and the price of entry is huge – hence, a bit like turning a container ship, these giants take time to move and the costs of expansion are significant.
At advanced process nodes (used for mobile devices such as advanced smartphones, tablets), TSMC is responsible for an estimated 92% of global production. Across the board, TSMC still supplies a quarter of the world’s supply of chips (24%) – and its capacity is fully utilised and it continues to expand its facilities: particularly important that this expansion is happening overseas given the geopolitical risks mentioned in the previous blog.
TSMC is being bullish and believes the demand is a long term upward trend and is even committing $100Bn in investments to expand its own capacity and research facilities.
But it’s clear that given the geopolitical risk we discussed in the previous blog, TSMC sees the need for its future facilities to be more globally diversified. The technology industry is nervous about the impact on the #1 supplier with tensions once again growing between China and Taiwan. One active TSMC strategy is building the fab in Phoenix, Arizona:
- Meanwhile, Intel is choosing to invest in Israel – spending $6Bn on Tower Semi
- Intel is also seeing the strategic neutrality and value in Europe – planning to invest $33bn, including almost $20bn in Germany for supporting two fabs
- The US Government under Joe Biden is subsidising US chip manufacturing to the tune of $52bn
- In October 2021, Tom Caulfield, CEO of GlobalFoundries was quoted as saying that they have sold all capacity through 2023
The final blog in the short series on ‘chip shortages’ will look at the impact on planning decisions and the measures companies need to take to maintain profitability in the face of time-to-market pressures and a shift in the chip supply chain.
