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Semiconductors: nanometre giants on the warpath

The annual production of electronic chips has reached one trillion units. The world's leading independent producer, Taiwan's TSMC, has established itself as a key playerwith on-going technological and strategic battles.

TSMC: number 1 in the chip market

Founded in 1987 in Hsinchu, Taiwan Semiconductor Manufacturing Company Limited (TSMC) is the 3rd largest manufacturer in this global market behind Intel and Samsung. However, as the limits of Moore's Law have been reached, the competitive battle is now around "advance logic chips". These ultra-optimised five nanometre products (five billionths of a metre) are on course to be at atomic scale in the future. In this field, TSMC is several years ahead, so much so that Samsung has announced its intention to subcontract part of its production to TSMC. The latter has opted for a pure player model, designing 10,800 products for its 500 customers. These include Apple (which accounts for 20% of its turnover), Nvidia and Qualcomm. In 2020 it had stock market capitalisation of USD 575 billion, earnings of USD 45.5 billion and profit of USD 17.6 billion. TSMC has 59% market share according to Counterpoint, ahead of Samsung (15%), UMC, GlobalFoundries and the Chinese company SMIC.

"As the limits of Moore's Law are reached the competitive battle is now around advance logic chips."

Strategic components

Semiconductors power a wide range of applications in the IT sector (such as- cloud computing and bitcoin mining) - communications, and industry, being used in mobile devices, cars, connected objects, and much more. The combined effects of the pandemic and the general growing, high demand for electronic devices have led to an increasing need for these small, non-metallic objects. There is now a significant shortage in sectors such as automotive and high-tech devices. Above all, the situation has revealed Europe's and the United States' dependence on Asia in this area and highlighted the technological and strategic stakes in the micro-chip market. So much so that US President Joe Biden included semiconductors in the list of supply chains of "essential goods", and the Senate released a USD 54 billion subsidy package for the sector. Meanwhile China has announced a USD 1.3 trillion plan for tech in general!

Part of geopolitical turmoilTSMC is considered to be a key player, and so is under pressure from all sides in the growing Sino-American trade war. All the time China still considers Taiwan to be part of its territory. Meanwhile the US Department of Commerce banned the Chinese firm Huawei from accessing US chipmakers which has forced TSMC to rethink its strategy. The American nightmare would be for China to block TSMC's production during a conflict, or to develop its own advance logic chips at the same speed as it has its space programme. The Middle Kingdom is already attracting thousands of Taiwanese engineers as part of its "Made in China 2025" plan. In April 2021, TSMC announced a three-year, USD 100 billion R&D investment plan and released USD 12 billion for the production of five nanometre chips in Arizona from 2024. By then, it expects to launch its first 3nm components in 2022 and then 2nm (considered the limit of current semiconductor technology) in 2024.

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