Diplomat author Mercy Kuo regularly engages subject matter experts, policy practitioners, and strategic thinkers from around the world for their diverse ideas on U.S. policy in Asia. This conversation with Dr. David Yoffie – Max and Doris Starr Professor of International Business at Harvard Business School and author of numerous publications on strategy and technology – is the 280th in the “Trans-Pacific View Insight Series”.
Evaluate TSMC and Samsung’s effectiveness in meeting global chip demand.
The impact of the pandemic has led to a surprising increase in demand for semiconductors, which no one anticipated. The result has been long queues at TSMC and Samsung to fill orders. In addition, it takes about two years to build and qualify a new semiconductor plant. As a result, it was impossible for a foundry to start new production quickly enough to meet demand. The effectiveness of TSMC and Samsung in meeting demand is disappointing to the world, but largely beyond their control in the short term.
Explain the impact of Sino-US technology competition on TSMC and Samsung’s market strategies.
Samsung is not directly in the crosshairs between the United States and China on semiconductors. However, TSMC is at the center of the conversation. Since TSMC controls over 60% of the capacity of smelters globally, U.S. companies and policy makers are very concerned about the concentration of such critical capacity in a location that could be threatened by independent geopolitical forces. their will.
How do geopolitical tensions in the Taiwan Strait interfere with TSMC’s business risk management?
If tensions escalate between the United States and China, or much more seriously between China and Taiwan, any supply disruption at TSMC could cripple some of the most important American tech companies, especially Apple, Nvidia, AMD. and Qualcomm. As a result, TSMC (and, to a lesser extent, Samsung) should consider expanding its capacity decision to more locations around the world, especially the United States and Europe. TSMC and Samsung need to reassure their global customers that tensions with China will not disrupt supply, and they have contingency plans to handle worst-case scenarios.
Identify strategic risks to businesses if chip shortages persist over the long term.
Strategic risks vary widely across companies and industries. For some industries, such as the automobile, which rely on older technologies, the main problem is a slowdown in production and lost sales. Most businesses will be affected relatively evenly. For tech companies like AMD and Nvidia, they are more dependent on advanced capabilities, primarily TSMC. A lack of supply could lead to a loss of market share and a reduction of their lead over Intel. For Apple, it depends on how TSMC allocates capacity. Today, TSMC seems to prioritize Apple because it is an important and important customer. If Apple maintains its position at the top of the queue, it may not be badly impacted, even if the shortages persist longer.
How should American policymakers and business leaders mitigate the risks for American companies dependent on chip production?
The Biden administration would like to provide around $ 50 billion in aid to the U.S. semiconductor industry to facilitate faster creation of new capacity to meet demand. But there are only two domestic manufacturers in the United States: Intel and Micron. Today, the vast majority of their production is used for their own crisps. Intel has announced plans to create a foundry that will compete with TSMC and Samsung, but Intel remains at least a full generation (and probably more than a full generation) behind TSMC. The US government should also explore incentives to accelerate capacity building for TSMC and Samsung in the US. Although this would take two to three years, it would help mitigate the long-term risks associated with geopolitical issues in Asia.