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Comment by mschuster91 | Hacker News Reader

So basically, another billion dollars worth of business for ASML and other suppliers of equipment that TSMC needed?

What I do wonder though, given ASML is a Dutch company, why no European governments are cooperating to start a new, European-owned chip foundry on European soil when the equipment is to a large degree manufactured in Europe. Something similar to Airbus/EADS in terms of setup.

Yes, there are GlobalFoundries and Bosch investing in "Silicon Saxony" aka Dresden, but the former is a US company owned by Emirati oil money and the latter is targeted to produce automotive chips. Europe needs independence from the US and security from China going full bonkers regarding Taiwan.

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Likely because it's BILLIONS of dollars of R&D with 0 customers at this point. You'd be building a factory HOPING to get design wins. If I'm Nvidia or Apple or insert company - am I going to risk an entire generation of chips on a startup in Europe with 0 experience beyond what they can poach from competitors? Whatever this European company is, they'd likely need to sell at a massive loss for a generation or 2, just to prove they can do it, and then hope to win some of the profitable contracts from an Apple or Samsung or Nvidia. I would imagine the investment would make a nuclear plant look cheap. And all of that is assuming TSMC or Intel don't build fabs in response to strangle you out of the market.

> I would imagine the investment would make a nuclear plant look cheap.

The disaster of Flamanville is projected to cost 13 billion euros. Even TSMCs biggest projects are smaller than that in numbers.

> Whatever this European company is, they'd likely need to sell at a massive loss for a generation or 2, just to prove they can do it, and then hope to win some of the profitable contracts from an Apple or Samsung or Nvidia.

Samsung, NVIDIA and AMD are currently blocked by the limitations of TSMC which is mostly caused by Apple paying upfront to reserve all of TSMCs 3nm output [1]. If Europe were to say "okay, we're putting up a 3nm fab and we will not sell to Apple at all" you can bet they would instantly join in to the collaboration, alone to have an alternative to a bidding war with Apple's unfathomably large war chest.

[1]: https://www.heise.de/news/Bericht-Apple-schnappt-sich-komple...

3nm chip production requires BEUV litoghraphy. That one is far out. The so-called 5nm nodes can currently only produce 14nm-sized features. If there is a customer that is willing to reserve the entire EUV and BEUV output of TSMC, so be it; but also keep in mind it is unlikely to see such a large project.

> If there is a customer that is willing to reserve the entire EUV and BEUV output of TSMC, so be it

A modern society cannot accept a single company gobbling up the entire supply of a constrained resource simply because it can. This stifles innovation.

>need to sell at a massive loss for a generation or 2,

Isn't this where gov't subsidies can help? Not only can gov't wave taxes which helps, but they can also just flat out buy the chips. Or they can add incentives to companies for buying these chips. Either way, it helps ease the transitional pains.

Not generally allowed under EU competition law.

Then they can do it like the LHC. Each country contributes, but it happens to physically located in one member country. Either EU feels like it is strategically important to not be dependent, or it's not. By your response, it is clear it is not an important agenda item.

In fact that’s exactly how TSMC and Samsung got where they are - the Taiwanese and Korean governments decided to invest in semiconductor manufacturing at the national level.

If a plan like the above goes through EU governments will likely subsidize the likes of Siemens and Philips with 10s of billions of €.

> What I do wonder though, given ASML is a Dutch company […]

It should be remembered that they have an international supply chain, including lots of stuff out of the US. If the US wanted to, they could basically prevent ASML from shipping finished products.

Not only is ASML a one-of-a-kind company, but so are a lot of their suppliers/partners.

The Odd Lots podcast had a good episode on this for a general audience (click Manage Cookies > Reject all to get to the article):

* https://www.bloomberg.com/news/articles/2021-11-15/asml-the-...

An earlier episode featured TSMC.

The US would only do that in case of a full blown US - EU trade war, which would probably paralyze the entire world, anyway.

FWIW, there are some initiatives, specifically there's an Important Project of Common European Interest (IPCEI) microelectronics and a European Chips Act (semi-conductors) in planning.

  > According to the European Commission work programme for 2022, released on 19 October 2021,
  > a proposal on a European chips act will be published in Q2 2022.

https://www.europarl.europa.eu/legislative-train/theme-a-eur...

Because there is precious R&D you need. ASML does not have the technology to do what TSMC does. There is no European company that has it. There are few non-TSMC companies that have it right now, and their tech is out of reach of anyone but them.

It costs TSMC $12b to build their fab. It will cost a United European government a lot more money and a lot of time to even develop the tech and by that time semiconductors will have moved on.

> ASML does not have the technology to do what TSMC does.

ASML creates the technology that TSMC uses.

In the same way that TSMC creates the tech that Apple uses but TSMC does not have the Apple tech. That is the value creation chain.

> why no European governments are cooperating to start a new, European-owned chip foundry on European soil

The boring answer is that EU governments are generally banned from subisising businesses, and the EU as a whole is very slow to move. https://www.reuters.com/world/europe/eu-could-clear-state-ai...

And what are 'the Europeans' going to do with said chips?

Bosch is investing in automotive as Europe has plenty of world leading car companies.

What world leading mass-market hardware tech companies does Europe have, which would warrant domestic chip production?

You could argue that the lack of mass-market hardware is because of, not due to missing domestic chip production.

Not sure if it would be true tough.

> What world leading mass-market hardware tech companies does Europe have, which would warrant domestic chip production?

AMD actually used to have a fab in Dresden, they spun it off to GlobalFoundries in 2012.

Europe as a market of about 450M people should have enough demand to saturate a fab with GPUs and CPUs.

Electric vehicle inverters? Each motors in an EV require its own 1kV/1kA programmable switching supply to operate.

Yes, those are valuable but power electronics don't need/use leading edge processes with EUV photolithography. Building more European fabs for power devices would be affordable and useful but it wouldn't compete with TSMC for advanced CPUs and GPUs.

> warrant domestic chip production

There are already loads of plants serving the domestic electronics industry? ST? Siemens? NXP? Infineon?

https://www.ft.com/content/f946703e-5d1e-4328-bd54-63f30ff49...

What I don't understand is why ASML/TSMC doesn't start a more aggressive monetization model, taking e.g. 30% of the profits of their customers like Apple does.

In the case of Apple, I would presume that they directly invest under very favourable terms in the technologies, the manufacturing equipment and the fabs to lock in a price. You don't raise the price on the bank giving you your loans.

>more aggressive monetization model

why Westerners always thinking about aggressive increase price? it may give you a short term profit but in the long run. your customers will start to look else where and try new technology to by pass you.

Apple stop paying Intel's tax. Apple stop paying Qualcomm's tax. Apple stop paying Samsung's tax.

i just don't understand why you want to kill your golden goose and its not like TSMC doesn't raise price. (they increase it by 20% during covid shortage). why create a lose-lose situation instead a win-win for everyone.

Imagine thinking profit-seeking is just a Western thing. Lol.

TSMC did hike prices the moment they were able. If they can maintain and extend their lead, they will hike them further. Because they can.

I am sure they will frame this as a win-win. Victors always do.

> Imagine thinking profit-seeking is just a Western thing. Lol.

Seems pretty clear to me that the comment you're replying to is talking about short-term profit maximization, and not "profit seeking" in general.

The argument is that excessive short-term profit maximization hurts you in the long run by driving your customers to look for alternatives. Which you'll notice only makes sense as an argument if you do care about profits.

And I agree that it's debatable whether this is specifically a Western failing or not, but it's sure become a common approach over at least the last few decades in the US of A.

Isn't this a natural end state of a quasi-monopolist traded in the stock market? At some point the market share cannot go up by much anymore but your share holders want to see growth. So the only way to show the needed growth is by increasing margins.

Increasing prices seems fairly safe for TSMC though as long as they keep their technological edge and are ready to lower prices again once a viable competitor emerges.

Not every stock needs to be a growth stock - dividends exists. Silicon valley and VCs screwed tech people idea of what the stock needs to do

Aren't dividends in general mostly a thing of the past? I thought they were unattractive due to being a forced tax event.

The Intel example is particularly interesting as AFAIK Jobs wanted to go with Intel for the iPhone. The problem wasn't the different architecture but that Intel wanted significant margins. Seems definitely short sighed for a strategic deal like that.

Source: https://www.acquired.fm/episodes/tsmc

> why Westerners always thinking about aggressive increase price?

Why do you unironically use the word westerner? that's like generalizing all of east asia

Because Intel struck back and NVidia managed to punch upwards by an entire node.

The moment TSMC can say "our node makes the king -- start bidding" their margins will expand exactly as you describe. They got close. Very close. Desperate, extreme action by the other players prevented them from fully capitalizing on the trophy. This time.

In truth, the 20% price ramp still reflects a partial victory.

NVidia isn't a fab company or a EUV lithography machine manufacturing company....

Perhaps you mean Samsung (which also uses ASML).

And no, Intel didn't "strike back". They forced an existing manufacturing technology to run even hotter and still manage to work.

NVidia is a customer of fab services, and it's customers, not nanometers, that decide which processes are competitive. Nobody would say Samsung 8nm was on equal quality footing to TSMC N7. NVidia, however, proved that they could ship products on Samsung 8 that successfully compete with products shipped on TSMC N7. That's what "punching up" means. It obviously wasn't easy, but it gives them leverage in the next round of negotiations with TSMC, because it proves that TSMC isn't an exclusive kingmaker. Not yet.

Yes, Intel did "strike back" -- they shipped competitive products and earned money. Like NVidia on Samsung 8nm, they had to punch up.

Once TSMC is a kingmaker, they will charge a king's ransom -- but they aren't. Not yet. Competitors are still holding on, though they certainly have the disadvantage at the moment. The 20% price hikes (which are actually more than 20%) reflect this dynamic almost exactly: TSMC is the champ, but not the undisputed champ, so they can start hiking prices but they can't actually squeeze out their customers' margins yet.

That's literally where they are now. Apple won the bid a while ago. The bids don't happen the same year as the chips come off of the line.

Not entirely sure if you are trolling. Considering you have asked this before and some gave you a few decent answers.

i.e. Europe does not care if 24 million Democratic Chinese are suddenly forced into an authoritative society against their will as long as they receive their cheap goods?

Pretty much just look at european take on Ukraine. "Not my chair not my problem".

Personally, I'd support more European backing of Taiwan, and if it needs to be by deploying a bunch of troops there, then that's fine by me.

The problem is that the German automotive industry has only China as market to grow (Europe/US/Canada are saturated, South America, most of Asia and Africa don't have enough rich elites, Arabia wants ultra-luxury/sports cars), and the automotive industry is extremely well connected to our politics - even if the CDU/CSU aren't in government any more, liberal FDP now is, and they'll bow to the whims of the industry... meaning Germany will not consent to anything that threatens the automotive industry. Italy and Greece have been forced to sell off harbors, airports and other infrastructure to China as a consequence of the 2008ff crises, Croatia has sold a large and important bridge project to China, and Hungary's Orban is effectively China's puppet.

The result of that, combined with the 100% consensus requirement on European foreign policy decisions, is why Europe will likely rather stand aside than show China the well-deserved boot. Especially disgusting given that the European Union's foundation was the lessons-learned of the NS dictatorship and we all swore "never again" - and now we're staying silent as China is building concentration camps for Uyghurs and Tibetans.

EU countries can and do act on their own -- see for example French military operations in Africa.

China is a whole different league to fight against than some backwater former colony and current dictatorship that struggles to feed its army.

It's no big deal to bomb someone like Ghaddafi's Libya to hell and back... China will fuck over your entire economy if you dare to establish relations with Taiwan, such as Lithuania currently experiences.

It's nothing to do with "Europe" or anywhere else, or consumers.

The reason the Chinese government is uninterested with the "bad press" around repression of minorities in their country is because the know corporations will always take profit over ethics, and will happily contract Chinese factories in the name of being "competitive" -- which boils down to bigger payouts for the executive class.

The disaster of Afghanistan has made everyone very wary of interventionist foreign policy.

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