Taiwan's Blue Chip
Chances are the computer you're reading this on uses an Intel chip—that could change very soon. Taiwan is the new semiconductor superpower.
Semiconductors are materials with electrical conductivity values somewhere between a conductor (think gold) and an insulator (think rubber). They are “doped” with impurities to create areas of differing charge called semiconductor junctions. These junctions form the backbone of all modern electronics: integrated circuits.
Integrated circuits, in turn, form the base of every electronic device we use. From your cell phone circuitry to your computer processing chip, all of them were built using semiconductors. As semiconductor technology has improved, so have our electronics. The first semiconductors, also called integrated circuits or chips, were created in 1957. Between then and now, the capabilities of integrated circuits have grown exponentially. Your PC now has more processing power than the computers that took the first astronauts to the moon—a testament to just how much better the technology is.
Semiconductors are so synonymous with change that one of the most widely-used semiconductors, silicon, is the namesake of the famous Silicon Valley.
As the electronics industry has grown, so have the markets for semiconductors. As companies and everyday consumers clamor for more computing power, the semiconductor industry will continue to provide. In October 2020, the Semiconductor Industry Association (SIA) released its plan for the next decade, calling for an annual $3.4 billion federal investment to fund semiconductor research and development. With companies and researchers always creating new elemental combinations in semiconductors to find the optimal solution, the next decade certainly looks bright for the industry.
But while the industry as a whole is doing well, one giant may be in for a bit of a shock.
Intel Corporation is the world’s highest-valued semiconductor company. Ranked 46th in the 2018 Fortune 500 top U.S. companies by revenue and with revenues of USD $75.7 billion, Intel is the largest semiconductor company in the world. Intel designs and manufactures computer motherboard chipsets, network interface controllers, and other integrated circuits. Intel dominates the market for computer processors—chances are, your computer is running on an Intel chip right now.
Intel is both a semiconductor design and manufacturing company. While many companies decide to design their own chips and send them to a dedicated manufacturer, Intel instead chooses to produce them in-house. While this gives Intel an advantage in that they have full control over the production process, it has hindered them in other ways. Intel must juggle not only design but also the production, manufacturing, and supply chain aspects that come with running one of the largest semiconductor companies in the world. Intel’s company structure and dominance in the processor market have brought them great success. However, it has left them open to unforeseen threats.
You’ve probably never heard of Taiwan Semiconductor Manufacturing Co. Ltd. (TSM). However, if you’ve tried to buy a car or PlayStation recently, their name might be familiar. TSM is well-known for their top-of-the-line and innovative semiconductors. TSM does little to none of its own design work. Instead, they produce the semiconductors used by other companies.
Taiwan Semiconductor is the 2nd largest semiconductor company globally, behind Intel, with revenues of USD $37.9 billion. Taiwan Semiconductor has also, quite frankly, left Intel in the dust with regards to chip architecture. One way to measure chip capability is Production Nodes (measured in nanometers). As of 2020, Intel’s chips operated at 10 nm while Taiwan Semiconductor’s operates at 5 nm (lower is better). Furthermore, Intel’s 10 nm (down from 14 nm) chips still aren’t in production—while Taiwan Semiconductor’s 7 nm chips are in mass production. This huge difference in chip architecture has put Intel at least a full generation behind Taiwan Semiconductor.
Taiwan Semiconductor won the IEEE Corporate Innovation Award for its 7 nm chips in 2020; they have since made steps towards producing 5 nm chips. Taiwan Semiconductor’s chips are quickly becoming some of the most advanced in the industry, putting them front and center of the future of semiconductor production.
Now and the future
Due to the COVID-19 pandemic, semiconductor supply chains have been disrupted. Because auto manufacturers and electronics companies covet Taiwan Semiconductor’s chips, this supply chain disruption has caused a shortage. In the U.S. this has lead to talks between the Biden Administration and Taiwan Semiconductor about the state of production. Germany’s Volkswagen AG, Ford, and Japan’s Toyota Motor Corp. have been forced to halt production until the chips are available again. The importance of Taiwan Semiconductor in global electronics production cannot be underestimated.
This year, Apple announced it was parting ways with Intel to produce its own faster processor. This change shows that Intel may not be keeping up with the demands for processor power. Apple also announced a partnership with Taiwan Semiconductor to produce micro OLED displays (a display built directly onto chips). This shift away from Intel does not bode well for Intel’s future.
Intel itself is already reliant on Taiwan Semiconductor for Graphical Processing Units (GPUs) and as x86 computer architecture is phased out, Intel may become reliant on Taiwan Semiconductor for central processing units (CPU's, aka the brain of your computer) as well to keep up with performance demands. Intel’s competitor in the CPU market, Advanced Micro Devices Inc. (AMD), already uses Taiwan Semiconductor for manufacturing. Sources say Taiwan Semiconductor is likely to start producing a 3 nm CPU by the end of 2022.
As Taiwan Semiconductor continues to produce top-of-the-line chipsets, Intel’s processors will become even more outdated. Taiwan semiconductor is already a force to reckon with in the automotive and electronics industries. As they continue to outdo Intel in the processor industry, they will become even more important. We have yet to see where this will leave Taiwan Semiconductor and the country of Taiwan as they become an even more powerful force in the market.