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Chip on the New Block – TSMC

TSMC (Taiwan Semiconductor Manufacturing Company, Limited) headquartered in Hsinchu is about to Dethrone Intel Corp who has dominated the chipmaking industry for more than 30 years. Producing the most critical component in bulk for the world’s computers is now under threat of competition from a company which many in the Global IT Industry haven’t heard before.

TSMC was founded by Morris Chang in 1987 to build chips for companies that could not afford to develop their facilities. TSMC is the world’s most massive dedicated Semiconductor Foundry, providing the industry’s leading process technology and foundry’s most extensive portfolio of process-proven IPs, libraries, reference flows, and design tools. TSMC has risen to challenge Intel at the zenith of the $400 billion industry. TSMC’s threat to Intel sees a sea change in chipmaking business.

TSMC is seen one company after another hire it to produce the chips they design. Customers of TSMC include Apple Inc, AMD, Qualcomm, Minnows, Ampere Computing, and ARM. Amazon recently announced its first-ever in-house server processor called ‘The Graviton’ made by TSMC which supports the new version of Amazon’s Cloud Service which is more than forty per cent cheaper than a similar offering powered by Intel Chips. The processor has IP from Annapurna Labs which AWS acquired in 2015. The instances are the first time ARM Server processor is dubbed Graviton.

According to the story on Bloomberg, “It’s about TSMC and its overall process node leadership, and it makes a lot of good points. Intel’s 10nm is expected to be roughly equivalent to TSMC’s 7nm, but TSMC has 7nm in-market already in mobile hardware, and AMD will almost certainly ship 7nm CPUs before Intel starts moving 10nm in volume. It’s been nearly 20 years since AMD and Intel transitioned to the same node at the same time. From the original Athlon to the present day, AMD has never beaten Intel to a node. Add up the total R&D spending by all of TSMC’s customers (some of which is undoubtedly being spent at TSMC itself) and the sum is more substantial than what Intel itself spends on R&D.”

Intel hasn’t faced a major competition in a decade, and Intel’s ninety per cent of the revenue share in computer processing will be delivering record results in 2018. However, there have been concerns raised on Wall Street regarding the competitors emboldened since TSMC has a good chance of replacing Intel as the no.1 chipmaker in the business. TSMC has already amassed a substantial market value than its rival Intel for the first time.

TSMC’s break happened when the smartphone first began filling customer’s pockets. When SmartPhone sales took off, the phone vendors used other processors from companies like Qualcomm or designed their own chips using ARM technology just like Apple. Intel dabbled in mobile chips and never committed its best design in the area and production preferring to prioritising Intel’s existing cash cow server chip and PC business.

Currently, the smartphone market is almost six times bigger than the PC industry in volume which has given TSMC the opportunity and advantage of high-volume manufacturing experience and ability that rested previously with Intel. According to Mark Li, “TSMC continues to deliver the latest chips on schedule without any mistakes.”

The TSMC’s hard-earned consistency has proven advantageous while Intel’s 14nm slipped badly, and the 10nm ramp has collapsed completely. Intel has ceded its overall leadership position by delaying the 10nm by the end of 2019. However, no one knows how well its 10nm will compare with 7nm from Global Foundries, TSMC, and Samsung, and it is premature even to speculate. Let us wait and watch. Apart from this, Intel also is facing a severe threat from Nvidia that has dominated in the HPC (High-Performance Computing) space which won large new markets for its Graphics Solutions and AI.

According to Goldman Sachs, the combined budgets of TSMC’s customers are not only larger than Intel, but the gap is increasing. By 2020, they will spend almost $20 billion, according to its estimate, at least $4 billion more than Intel.

To summarise, These are market speculation and the next big wave awaits the transformation of the industry. Let us watch how the semiconductor businesses work through its strategy to capture and grow its market share.

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