Trade dispute could disrupt memory chip supplies

TSMC is strong between the United States and China as Intel lags behind

There are only three companies that can manufacture super-advanced chips in the world: Taiwan Semiconductor Manufacturing Company (TSMC), Intel based in California and South Korea Samsung. The manufacture of state-of-the-art chips is rare and specialized, because it is incredibly expensive to continue to compete at the highest level.

This week, TSMC (TSM) stocks rose to new heights in Taiwan later Intel (INTC) warned that it was not too late to manufacture nanometer chips and that they could outsource their production. Advanced chips can store and process more information. A smaller nanometer size means a more advanced chip.
TSMC is the most likely candidate for the American firm could turn to help. Samsung (SSNLF) it produces 7-nanometer chips, but its manufacturing business is small compared to TSMC. It also mainly makes memory chips, while Intel needs help to manufacture advanced processing chips.

Intel’s setback will probably not affect its purpose. The company has run the semiconductor industry for years and will likely be able to manufacture 7 nanometers on commercial levels “in a fairly short time,” according to Bret Swanson, a member of his visit to the American Enterprise Institute, a think tank based in Washington.

But TSMC’s successes right now, and its position as a leading supplier in numbers, make it a very important company at a critical time. The United States and China are locked in a battle for who can more quickly develop the technologies of the future and both countries have partnerships with TSMC to supply them with the chips they need to power advanced technology like artificial intelligence, 5G and cloud computing. .

TSMC remains up against tensions with the United States, but risks angering China

The company is also spending big money to maintain these relationships. TSMC announced earlier this year that it is building a $ 12 billion manufacturing facility in Arizona that will be able to produce 5 nanometer chips by 2024. The announcement was a triumph for the Trump administration. , which wants to have more advanced chip manufacturing capabilities in the United States. States to secure supply chains for chips used in military or sensitive civilian applications.

But the fact that TSMC is helping the U.S. shore in its chip-making capabilities could upset China. TSMC has invested billions of dollars in manufacturing plants in mainland China. It should Beijing retaliates against TSMC and Taiwan, which would at least launch the troubled markets.

“There has been concern in Taiwan about the potential for Beijing to nationalize TSMC bills [plants that fabricate chips] in Nanjing and Shanghai, ”said Paul Triolo, head of global technology policy at Eurasia Group.

While China has never controlled Taiwan, the communist government considers the self-governing island as an integral part of its territory. China sows as long as the United States has diplomatic commitments to Taiwan. Officially, Washington has only diplomatic relations with Beijing.

Assuming Triolo, it is very unlikely that they will take over the plants of mainland China, which are wholly owned. “It would be a major escalation and a major blow to the business community. It is not clear what they would buy for Beijing apart from the main negative drawbacks,” he added.

What China could do is try to convince TSMC to build a high-end plant on the mainland. The current TSMC plants in Nanjing and Shanghai operate less advanced technology. The company’s most advanced factories are located in Taiwan and Arizona would be the first large-scale plant abroad, seconds in search of counterpoint.

“Beijing could argue that if TSMC is willing to do so [build] An advanced factory in Arizona, it should be willing to do the same in China, “Triolo said.

Washington’s long campaign of pressure on Huawei highlights the harm China needs to reduce its independence from foreign foreign manufacturers.

The latest U.S. sanctions announced in May cut back on the Chinese telecommunications manufacturer outside TSMC. Although TSMC is a Taiwanese company, it relies on American technology to make chips. The U.S. Commerce Department said TSMC and other chip makers using U.S. technology should now apply for a license to export products to Huawei and its chip subsidiary HiSilicon. These apps are likely to be denied, as Washington wants to let the Huawei team stay out of global 5G networks.

Apart from geopolitics, there is also geography. Taiwan is the world’s leading exporter of semiconductors and the global supply chain needs more chip capabilities spread around the world.

TSMC is the largest contract chip manufacturer in the world. Companies like apple (AAPL), Amazon (AMZN AMAZON), Qualcomm (QCOM)i Nvidia (NVDA)they can design advanced chips, but they don’t have the expensive manufacturing capabilities of TSMC to build them. They are “fabulous” chip makers.

While Intel can design and manufacture its own semiconductors, it can only turn to TSMC when it lags behind in cutting-edge chips.

The concentration of so much semiconductor manufacturing capacity on a small island off the coast of mainland China has always been a concern for the supply chain, according to Swanson of the American Enterprise Institute. “What if there is a tsunami in Taiwan?” He said.

This puts TSMC back in a very strong position. “The West would probably want to help protect Taiwan not only geopolitically, but because of that technical capability and that technical capability,” Swanson said.

China lags far behind in making chips

Taiwan has shared its technical knowledge with China. Over the years, hundreds of thousands of Taiwanese engineers have gone to the mainland to help develop China’s national semiconductor industry, which Swanson notes has “made tremendous progress in the last two decades.”

Despite strong domestic support, semiconductors remain a key technological bottleneck for China.

The International Semiconductor Manufacturing Corporation (SMIC), the country’s largest chip maker, remains trapped for three to five years after industry leaders Intel, Samsung and TSMC, according to Triolo, of the Eurasia group.

China invests billions in chipmaking to close the gap with global rivals

SMIC currently manufactures 10 nanometer chips, while the major players are already producing 7 nanometer chips and are moving to the transition to 5 nanometers and finally 3 nanometer chips.

To make 7-nanometer chips, however, companies need access to an extreme ultraviolet lithography (EUV) machine. These machines are capable of producing complex patterns of chips. They’re also very difficult to operate, which is why Intel has trouble making 7-nanometer chips for commercial production, according to Triolo.

SMIC’s problem is that the United States is pressuring the Netherlands to block the sale of EUV equipment to SMIC by Dutch company ASML, Triolo said. The technology is designed by ASML, but includes substantial amounts of US intellectual property.

The geopolitical situation could change. But given the time it takes to dominate EUV, any major lag would drive SMIC’s commercial entry into today’s most advanced chips in 2023, Triolo said, and so industry leaders will be well ahead.

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