Thread by @dnystedt

With all due respect to former President Trump, Taiwan did not steal the US semiconductor industry.
-Taiwan created trillions $$$ in value for the US chip industry, helping transform it into the juggernaut it is today.
-Taiwan helped save the US chip industry from Japan.
-Taiwan continued manufacturing chips long after it became passé in the US.
Thread 1/17 #semiconductors #semiconductor $TSM $NVDA $AVGO $QCOM $MRVL $AMD

2/17 The top five US chip designers – which would not exist today without TSMC – are worth over US$4.8 trillion in stock market value:
$NVDA $AVGO $AMD $QCOM $MRVL

3/17 The US is No. 1 in the world in chip design, with over 1,000 design firms and a growing number of firms with a design arm, like Apple – who depend on TSMC, or other chip foundries, for manufacturing.

To boot: the most cutting-edge development is done by chip design startups, who only exist because they do not need to raise the US$25 billion for a state-of-the-art fab today.

4/17 They do the chip design and let TSMC do the manufacturing.

The latest start-ups have kept the US ahead in AI: TensTorrent, SambaNova, Cerebras Systems, and the AI chip arms of, Amazon AWS, Google, Meta, Microsoft, Tesla.

None of these firms manufactures their own chips. They outsource to TSMC or Samsung.
$AMZN $GOOGL $META $MSFT $TSLA $TSM $SSNLF

5/17 The idea that unleashed all this innovation came from Morris Chang, an American who in 25-years at Texas Instruments, rose to the top of its chip division.

Taking on a new challenge in Taiwan, he barely had an inkling of what he was about to unleash with the chip foundry business idea.

“I only hoped for it,” he said in a 2007 interview.

It sounds simple. He offered chip manufacturing services to any company that needed it.

6/17 In the mid-1980s there were about 50 chip design companies struggling to survive. Their chips were made by giants like Fujitsu, IBM, NEC, or Toshiba.

But production came at a price. They only got space on the line when it wasn’t used by the maker’s own chips. And by contract, the design often had to be transferred, giving the big company the right to come out with a competing chip under its own label.

Talk about stifling innovation.

7/17 There were also dozens of engineers who wanted to start their own firm, but could not raise the money – as noted above, chip fabs are expensive.

That was the bottleneck.

TSMC transformed many of these small firms into giants, including 4 of the 5 in the graphic above, by partnering as their dedicated chip manufacturer.

TSMC built the fab and invested in manufacturing R&D, leaving design to the client.

8/17 Today, the US is the global leader in semiconductors, winning over 50.2% of global chip revenue in 2023 and No. 1 in chip design, EDA software, and production line equipment, according to the US Semiconductor Industry Association (SIA).

9/17 If the 50.2% figure seems strange, it may be because intense CHIPs Act lobbying in the US focused like a laser on only one thing: manufacturing.

Yes, it would be good for the US to beef up its chip manufacturing.

But to be clear: The US is 1st in semiconductors, not last as some seem to think.

10/17 Japan: Morris Chang’s vision for TSMC came at an opportune time. Japan was No. 1 in world in semiconductor revenue from mid-1980s to early 1990s due to their prowess manufacturing memory chips.

11/17 But after pushing most US chip makers out of memory, Japanese firms only had each other to compete with. And, having solved the key bottleneck in memory chip production, it became a race to the bottom.

Then, they made a fatal mistake, missing the rise of a new product: the personal computer.

From the early 1990s on, PCs and gadgets to go along with it, printers, scanners, digital cameras, gaming graphics cards, and more, gobbled up chips.

By 2000, half of all semiconductors went into PCs.

12/17 American start-ups (Nvidia, Broadcom, etc) and giants (Intel) alike were already jumping into PC related products, many with partner TSMC.

Japanese firms did not.

Then they made another mistake.

13/17 Despite tremendous chip design talent, they kept their inhouse chips for their own products, limiting the quantity and pushing up the cost-per chip compared to the mass market prices US chip designers were able to offer.

And Japanese firms were loath to farm out production to a chip foundry like TSMC – which some saw as an easy way to lose technology.

Keeping production in house meant spending billions $ a year to keep up with the latest manufacturing tech.

14/17 That’s the abridged version of how Taiwan and TSMC transformed, and enriched the US semiconductor industry – and helped save it from Japan.

15/17 The last part, about manufacturing becoming passe in the US...

The US was and is always free to offer subsidies for chip manufacturing. Losing that edge was at least in part a self-inflicted wound.

But we can be thankful that our allies, Taiwan and South Korea, excelled, and continue to excel, in chip production today.

16/17 Politics: This note about Taiwan. It’s not about the upcoming US election.

I have great respect for former President Trump for taking the China (CCP) threat seriously – and taking action before any other administration did.
And I have great respect for President Biden for continuing and expanding that effort.

17/17 Links

Stock market capitalization data is from StockCharts.com, and can also be found at Yahoo Finance and on Google Search by typing in the stock ticker. Stock market value changes every day the market is open.

Morris Chang 2007 Computer History Museum Oral History
computerhistory.org/collections/ca…

Semiconductor Industry Association (SIA) 2024 Factbook:
semiconductors.org/resources/fact…

Japan portion: From extensive research, most from books. Will try to find good links to post later.