TSMC is, together with Samsung, the world’s largest giant in terms of chip production, and there are not a few large companies that depend on them to manufacture their products. According to the latest measures announced by the US government and the European Chamber of Commerce, Mark Liu, CEO of TSMC, has come to the fore to destroy everyone’s hopes.
TSMC says making chips in the US and Europe is not profitable
In the words of the CEO of TSMC, ‘Expanding chip manufacturing capacity in the US and Europe is not economically realistic. The result of doing this will result in establishing a production capacity that will not be profitable. ‘
According to Liu, TSMC has sufficient capacity to meet the growing demand for chips for Artificial Intelligence and 5G, two of the factors that are causing precisely the shortage that we suffer today. He has also commented that it is precisely external factors (the economic war between the US and China and the pandemic caused by COVID-19) that are causing the situation, and that if it were not for these there would be no shortage.
However, what Liu has not done is to provide empirical data that can support these claims. According to him, at TSMC they have sufficient production capacity to meet the demand for chips that exist today, but which obviously are not limited to AI or 5G but rather extends much further (and this hardware fans know very good), and without specific figures we cannot know to what extent this statement is true.
Nor has it said why expanding chip production capacity in the US and Europe is not economically realistic. It is clear that no project of such magnitude will be profitable at the beginning because it involves a millionaire investment to establish the factories and supply chains and start them up, but in the long run they should be profitable once the manufacturing node is mature and well established in the market, as long as they obviously find customers. After all, no business is profitable from day one.
TSMC, are you afraid of losing customers?
And this may be a key point for the statements of the CEO of TSMC: the customers. It is currently obvious that the company is not meeting market demand, and this means that many customers could potentially look to other suppliers. If the US and Europe have the capacity to produce chips that TSMC is not capable of providing… what would prevent them from switching suppliers? In our opinion, Liu’s statements may be motivated precisely by fear of losing these clients.
It is quite clear that the demand for chips is not going to decrease and less now after the current shortage, and even if the two problems mentioned by TSMC (the pandemic and the trade war) were solved, it would still take many years to return to a situation normality (in fact it has already been mentioned above that this scarcity situation could become a “new normal”). This means that the doors are left open to new contenders in the industry, something that obviously does not interest a company like TSMC that has a near monopoly.