TSMC founder Morris Chang cautioned that TSMC's edge in the semiconductor industry may erode due to geopolitical and economic challenges. He believes Japan is expected to stand out in the global semiconductor manufacturing ecosystem.
During a speech at TSMC's sports event after a three-year hiatus due to the pandemic, Chang said he had foreseen that TSMC would evolve into a strategic battleground for global powers at the last TSMC sports event held in 2019, with the past four years validating his foresight.
Chang said that the prevailing emphasis on national security had eroded globalization and free trade within the semiconductor industry, elevating TSMC's significance for countries, adding that some competitors are trying to seize the opportunity to outdoTSMC.
TSMC possesses numerous advantages that prove challenging for competitors to match. Chang mentioned that TSMC's partnerships with customers and suppliers and the Open Innovation Platform (OIP), providing IPs for customers and making it hard for competitors to replicate and surpass TSMC. Other advantages include economies of scale in manufacturing, significantly reducing costs by scaling up production and accumulating experience.
Chang noted that the dedication of Taiwanese engineers in promptly responding to late-night phone calls reporting equipment errors often surprised people in the US, underscoring the cultural differences in work culture between the two places.
Nevertheless, Chang cautioned that a renewed focus on national security at the expense of globalization could potentially diminish TSMC's competitive edge over the next 20-30 years.
Making chips outside of Taiwan
Many countries hope to build their semiconductor supply chains, with Japan an ideal place, especially Kyushu, thanks to its advantages in terms of water, electricity, land, and work culture, said Chang. Singapore also stands out, albeit constrained by its limited land, water, and electricity resources.
As for the US, Chang said the country had been as competitive as Taiwan in semiconductor manufacturing until after 1972; however, despite losing a significant portion of its advantages in manufacturing, it stays relevant and does not require a substantial amount of capital expenditure to rebuild its leadership.
Intel benefits from home advantage - not from its experience building and operating wafer fabs in the US, but from solid backing by the White House as its embodiment of "Made in the US." This advantage is especially relevant if customers one day believe there is no significant cost difference to place orders with Intel in the US. Chang believed that Intel has the potential to be a formidable competitor if the chipmaker can deliver excellent services, cutting-edge technology, high yield rates, and competitive pricing. However, Chang remained cautious, acknowledging that not all of these conditions are guaranteed to materialize.
Chang further said that it is possible for Vietnam and India to become semiconductor hubs in the future.
Chang expressed his dream of operating a wafer fab in the US, but WaferTech, set up in 1995 in the US, encountered significant setbacks, mainly stemming from issues like cultural differences. Chang believed that TSMC has evolved in terms of talent, capital, and technology over the past 28 years, making it well-prepared to turn its dream into a reality.
When asked about the ironic question about Intel's recent exposure to risks due to the Israeli-Palestinian conflict after Intel CEO Pat Gelsinger's previous comments on Taiwan not being a safe place, Chang said the conflict would not have a material impact on Intel's operations in Israel.
