Comment by bee_rider | Hacker News Reader

Comment by bee_rider | Hacker News Reader

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TSMC only does fabrication, no chip design. Pretty much everyone making high-performance parts other than Intel sends uses them, AMD included. This is typically known as the “foundry” business. They are the biggest pure foundry by far, and all of their competition has some downside (Intel and Samsung aren’t pure foundries, you have to compete with their in-house demand, Global Foundries is behind and isn’t competing for the smallest nodes anymore, and SMIC is a state-owned Chinese company and, among the other concerns that brings up, they can’t get access to the latest photolithography machines for geopolitical reasons).

Speaking of politics TSMC, is in a unique geopolitical position. Their government sees being the chip foundry for the whole world as an existential issue. China would like to take over Taiwan for historical reasons, and they can’t possibly build a large enough army to defend themselves against a really motivated full-strength attack. So instead they have put themselves in a position where any attack would be incredibly disruptive to the global economy and anger everybody.

The silicon industry is famous for very long roadmaps, very long investment payback times, cyclic demand, and winner-take-all competition. It is brutal. TSMC, serving everyone and with a friendly government at their back, is in a good position to out-endure everyone.

That’s the business part. The science and engineering is over my head, and I think sort of hard to talk about. Each node is a new engineering marvel basically.

Thank you, it is clear that there should be an engineering marvel there and/or as you said it is a natural monopoly.

I also asked because I remember in the early 2000s talking with people from Tower [1] and at that time tgey were super bullish for the model I think it does not work pretty well from them even with top-notch engineers.

[1] https://en.wikipedia.org/wiki/Tower_Semiconductor

A winner-take-all industry looks great as long as you are the winner that takes all.

> It is brutal.

Makes me wonder. At what point will Apple try to build/buy their own foundry?

IMHO, it's better for Apple to be a foundary customer than to run an internal foundary.

As a customer, if TSMC falters, they can switch to Samsung or Intel (if Intel foundary materializes).

As a vertical foundary, it's very hard to switch if it falters. AMD managed to spin out their foundry which was becoming non-competitive and switch to TSMC, Intel has a lost decade because of the pipeline bubble caused when the Intel 10nm foundary arrived late and with poor yields.

Apple has a very hard time selling to business, and I think would not be able to credibly provide foundry services to others, so it only works if they can keep it on the leading edge.

Never say never but I suspect they are quite happy with the current setup. Apple makes premium devices. Everybody needs a mix of chips but their needs skew toward the newest node. They can instead pay TSMC a bunch of money to reserve capacity on the next node, funding the construction of the facilities, in exchange for a spot at the front of the queue. Then, when the node after that shows up, they can move along, and TSMC can continue using it for lower-margin companies.

There’s no need for Apple to buy a foundry when they can afford to purchase virtually all of TSMC’s capacity for any new chip process.

>At what point will Apple try to build/buy their own foundry?

Likely never. As long as you understand how foundry works, economy of scale, long tail of older nodes, capacity planning and amortisation of R&D.

i.e Unless Apple is happy to Fab for their Android competitors and their Android Competitors are also somehow happy to buy from them the likely hood of that happening is practically zero.

Apple is exactly like the CCP; It has a 10, 25, 50 year roadmap that it secretly works on.

Recall that famous article about the "largest hedge fund nobody has heard about" -- Apples hedgies that were a couple of people in Reno Nevada?

Surely they have been looking at the math forever - I wouldnt be surprised if they have already pulled the trigger on something.

However, they are masters of supply chain - and were investing in companies that are inputs to their supply chain, and rig the system for their own margins.

They would buy up a companies capacity for a component, and invest in them, and basically own that node in the chain.

With Ruthless brilliance.

> At what point will Apple try to build/buy their own foundry?

As soon as they are tired of having money.

It isn’t just the cost of building Fabs, literally their entire supply chain is based on being Fabless, and changing that is ridiculously expensive. They have some amazingly skilled chip designers inhouse, but even so many aspects of the actual manufacturing side of the design process were not done at Apple, although they exert an outsized influence.

I think it's pretty clear that the importance of TSMC will decline at the same rate as the price per transistor decreases ever more slowly. Chip companies don't need the most recent node when it offers hardly any improvement per cost.

The slower the progress, the easier it is for competitors to catch up "close enough". Currently being two years behind the bleeding edge makes a significant difference, but not as much as ten years ago, and probably more than a few years from now.

Actually, isn't it quite clear that the complete opposite of what you said is true? TSMC's importance is at an all time high right now even though, as you said, being 2 years behind doesn't make as much a difference as it did 10 years ago.

TSMC's importance is at an all time high because they're finally in the lead, which wasn't true 10 years ago, when it was Intel.

People like to buy the best chip, being in the “best” position has a advantage in-and-of-itself I think.

If the field actually stagnates for good, yeah, they’d have to pivot I guess. We’ll see if/when it happens.

I don’t think that’s clear at all. All I’ve seen is many small fabs closing down were close enough to bleeding edge wasn’t sustainable. Intel is only surviving its last (and current?) fumble because of their past lead.

Though maybe I’m just out of the loop? who are the accessible close enough competition that you have in mind?

The writing is indeed on the wall for TSMC's (and consequently Taiwan's) political value.

The entirety of the western world has made it clear, with cold hard cash and sheer political will, that they want out of the singular egg basket that is Taiwan.

Noone wants to be in the path of the inevitable freight train that is One China(tm).

We’re both moving at the same time of course, the US has a huge amount of resources, so I’m sure if we had, say, a decade long really focused manufacturing-based economic policy there’s nothing they could do to keep us from taking the crown.

Alternatively if we catch a unicorn and contact some aliens maybe they’ll tell us how to make CPUs out of the horn.

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