#TaiwanChips #ChipManufacturing #TaiwanTechnology #SemiconductorIndustry
Have you ever wondered how a small island like Taiwan manages to produce the greatest chips in the world? 🤔 It’s a fascinating topic and one that involves a complex mix of technology, expertise, and innovation. Let’s dive into the world of chip manufacturing in Taiwan and explore why these chips are so highly regarded.
##The Rise of Taiwan in Chip Manufacturing
Taiwan has long been a major player in the semiconductor industry, thanks to the efforts of companies like TSMC (Taiwan Semiconductor Manufacturing Company). The country’s success in this field can be attributed to several key factors:
1. **Technology Investments:** Taiwan has made significant investments in cutting-edge technology and research, allowing companies to stay at the forefront of chip manufacturing.
2. **Skilled Workforce:** The country boasts a highly skilled workforce that is trained in the latest manufacturing techniques and processes.
3. **Government Support:** The Taiwanese government has played a crucial role in supporting the chip manufacturing industry, offering incentives and subsidies to encourage growth and innovation.
##TSMC and Its Dominance in Chip Manufacturing
TSMC, as the largest and most advanced semiconductor foundry in the world, has solidified its position as a global leader in chip manufacturing. Here’s why the company’s chips are so highly regarded:
1. **Advanced Technology:** TSMC invests billions of dollars in research and development, allowing it to develop cutting-edge chip manufacturing processes that are difficult to replicate.
2. **Exclusive Agreements:** The company has secured exclusive agreements with major tech companies, giving it a competitive advantage in the production of high-performance chips.
3. **Expertise and Experience:** With decades of experience in the industry, TSMC has honed its expertise in chip manufacturing, setting itself apart from competitors.
##The Challenges of Replicating Taiwan’s Chips
So, why can’t other companies replicate the success of Taiwan’s chip manufacturing? It all comes down to the complexities involved in the process:
1. **Technological Barriers:** TSMC’s proprietary technology and manufacturing processes are highly advanced, making it incredibly challenging for other companies to replicate its success.
2. **Intellectual Property Protection:** TSMC holds numerous patents and intellectual property rights, making it difficult for competitors to imitate its technology without facing legal repercussions.
3. **Economies of Scale:** Taiwan has established a robust ecosystem for chip manufacturing, allowing companies to benefit from economies of scale that are difficult to replicate in other regions.
##The Impact of Taiwan’s Chips on the Global Market
Taiwan’s dominance in chip manufacturing has had far-reaching implications for the global market:
1. **Technological Advancements:** The country’s chips have driven significant advancements in technology, powering everything from smartphones to data centers.
2. **Economic Influence:** Taiwan’s position as a leader in chip manufacturing has given it considerable economic influence, shaping global trade and supply chains.
3. **Innovation Catalyst:** TSMC’s innovations have inspired other companies to push the boundaries of chip manufacturing, leading to a culture of continuous innovation in the industry.
In conclusion, Taiwan’s success in chip manufacturing can be attributed to a combination of technological prowess, expertise, and strategic partnerships. TSMC’s position as a dominant force in the industry has made it incredibly difficult for other companies to replicate its success, solidifying Taiwan’s status as the home of the greatest chips in the world.
In summary, through investments in technology, a skilled workforce, and government support, Taiwan has become a dominant force in chip manufacturing, with companies like TSMC leading the way in producing the greatest chips in the world. The technological barriers, intellectual property protection, and economies of scale present significant challenges for other companies looking to replicate Taiwan’s success. As a result, Taiwan’s chips have had a profound impact on the global market, driving technological advancements, exerting economic influence, and catalyzing innovation in the semiconductor industry.
Most nations know the broad strokes of how to make a nuclear weapon but the how is so nuanced that it’s almost impossible to reverse engineer without incredible financial resources.
Same with chips. They have insane in-house knowledge curated over decades that is so sensitive, should China attack Taiwan, they would more likely destroy their processes rather than let them fall into CCP possession. We can see the final result, but trying to reverse engineer it without access to the process is challenging
The US is now committing huge financial resources to try to catch up with state-side competition.
That’s not entirely true
TSMC (Taiwan Semiconductor Manufacturing Company Limited) is one of the premiere chip manufacturing companies in the world but they are hardly the only one.
They are of note because they make everything from common chips used in everything from cars to cellphones to AMDs processors. Apple, Nvidia, AMD, and Qualcomm for example all use TSMC to manufacture their chips.
But Samsung (Korea) and Intel (US) also have chip foundries of that caliber.
TSMCs secret is just that they have large numbers of highly experienced people working for them and have developed very good processes. Samsung and Intel are similar in that regard, but TSMC is special in that the Taiwanese government has in a sense made semiconductor manufacturing the countries primary industry.
Other companies like Texas instruments can also make microchips and have facilities all over the US but can’t make chips as complex as Computer microprocessors. Importantly though there’s nothing stopping them from investing capital to build such a facility, they just don’t want to. (Developing an in house microprocessor to compete with AMD and Intel at this point would require an outrageous investment)
Israel is also another big up and comer in chip manufacturing.
Why TSMC is of note is the Pandemic showed just how vulnerable the US and the West are to losing access to TSMC production. If China for example were to invade Taiwan it could be a really big problem for the economy and availability of these chips.
This is why TSMC is building a Chip Foundry in ~~Texas~~ Arizona right now so chip production can happen domestically in the US.
Let’s say you wanted to make a fishing pole. First, you’d go find a stick in the woods and put a string on it. Then, you’d learn that it’s gotta be stronger or it’ll snap because fish are strong. So you find a stronger stick made of oak. But now you notice it’s too stiff, having some flex is needed. And you go on learning the failings of your current version and improve upon it.
Same thing with *micro*chips. We are approaching a point where transistors are the size of a single atom. The tech, the expertise needed to build that isn’t very common. Even the lithography machine that builds the chips is only made by one company in the whole world and it takes a whole train to deliver it. Then you need employees that even know how to do this stuff. Then just bringing up a factory will cost many, many billions.
It’s not that other companies can’t replicate them, it’s that the amount of startup money needed to get a top of the line chip manufacturing facility running is immense. In the 80s, the Taiwanese government put up a large amount of that startup money believing that it would pay off later, and it did. Lots of companies decided they’d rather pay Taiwan’s company to manufacture their chips for them instead of build their own facilities.
It’s the special salt and seasoning. Plus they use a special oil for frying. Best chips you can find.
Pretty much the biggest reason is that there isn’t enough volume in chip manufacturing to justify it. If we added similar chip manufacturer, it wouldn’t double the amount being produced because there aren’t enough people to consume all of them. That means the investment would likely not be returned. All it would do is hurt TSMC, but it would hurt the investor more.
TSMC is the largest semiconductor foundry the market share was 59%, the are followed by Samsung Foundry at 13% and UMC, GlobalFoundries , SMIC each at 6%. This is just foundries that make semiconductors for others, Intel that make many chips for themselves is not included.
Samsung production technology is quite close to TSMC. According to them “Samsung’s 4 nm technology is two years behind TSMC’s, and our 3 nm is about a year behind. But things will change when TSMC enters the 2 nm process,” So quite similar and the difference will become smaller over time.
The reason one or a few companies are dominant is because of the cost. The cost to develop a process at a smaller scale is billions of dollars. The cost to build a factory for it is billions. Whe a process changes to a smaller scale the upgrade cost is almost the same as a new factory, the buildings are not the most expensive part, it is the equipment in them.
TMSC built a new factory in Phoenix, Arizona The initial investment was $12 billion and when the factory grows the total investment will be around $40 billion. The construction of the first parts started in 2021 and production is expected at the end of 2024.
Because of the high development cost a single company that can build many factories has the advantage, It can spread out the development cost over all factories and chips made.
If you try to create a competitor you will first need to get people, the ones that know how to do it and already work at the other funders. You would also need to do a lot of research to get to the level they were when the new process development started, the you will need to repeat what they did. The complied that is first and developed new technology will get lots of patents and can stop you from doing some parts exactly like they do. This makes it harder if you are late.
Fo there is one part of the semiconductor manufacturing industry only one company can do that is ASML in the Netherlands. They mate the photolithography machins that is used to project the pattern onto the wafers other processes is to add and remove material. No other company can make machines that project them for the smaller processes.
Man. I wanted to know about these top secret amazing Taiwanese potato chips and/or French fries.
Like other people said, they’re simply the most advanced right now in terms of practical semiconductor manufacturing. You start running into a LOT of problems at the insanely small scales modern chips work at. Companies have a lot of trade secrets and/or patents related to ways of working around those problems. So either you need to pay to license their tech, or spend a lot of time and money figuring the not-publicly-known bits out yourself. Plus, building a modern semiconductor fab (or upgrading one to work on the latest kinds of chips) costs billions. So there’s a high barrier to entry even if you know what you’re doing.
In addition to all the other things everyone else has said, features on top-of-the-range modern chips are just a few atoms across.
Everything is super sensitive to the environment at these scales and the kind of physics we are used to in our macroscopic world is overwhelmed by considerations like quantum effects.
People can do this stuff in the lab, but that is very different to doing stuff profitably at scale. When your yield rates are affected by e.g. a roadworks two blocks over, you have the manufacturing process from hell. It takes a long time, a lot of trial and error and a huge investment to get everything working smoothly; it’s not just a matter of doing the right thing, but also of working out what the right thing to do even is given what it is like where you are and what is around you. Since the outcome is the result of many many iterations of trial and error, people may not even be explicitly aware of which tiny details matter and are critical to get right.
It is certainly possible to set up a workable fab node elsewhere, and others do exist, but it would take a vast amount of time, money and effort to go from building site to commercially profitable facility even if you had complete access to TSMC facilities to use as reference.
The Taiwanese government made the strategic economic and military decision that relying on other people’s inate love freedom and philosophical support for western-style democracy was all well and good, but being as indispensable to what they thought the modern global economy would be as possible was better.Â
As such the Taiwanese government invested *metric fucktons* of money and resources and social capital in promoting the growth of the semiconductor industry and a few other sectors.Â
Others *could* replicate their success, but they would have to be able to, if not match their drive and intensity, at least match (or more likely exceed) their resource expenditure in order to even have a chance at succeeding. TSMC was a very large bet for the government of Taiwan, and it took decades of investment before it really began to pay off. If you aren’t under the same sort of existential pressures that they are ,it is probably a lot more difficult to maintain that level of investment for decades before seeing results.
The US used to be the world leader in semiconductors, and it is beginning to reinvest there, but even in such historically fertile grounds and even with the resources of the US, results are not guaranteed, especially given how fractious our political process has become.
Intel and Samsung can. The ‘nanometer’ thing is mostly marketing fluff. It actually doesn’t refer to any single measurement on a transistor. Thus, there is no part on a 3nm chip that is 3nm. TSMC just has the largest capacity to produce a chip that is in the ‘3nm class’.
Is it telling that my first thoughts were of
A) potato chips, and I was confused because, well, who would associate Taiwan with Potato Chips, and what have I been missing out on? OR,
B) poker chips, and I was wondering if this were somehow influenced by the cultural predilection most Asians seem to have for gambling.
Semi conductors manufacturing is the most difficult mass production on the planet.
It requires tremendous amounts of investment to build and operate a fab. Each successive semi-conductor generation (often called a “node”) is getting more difficult and expensive to design and produce, with the possibility of it being delayed / faulty increasing (this happened with Intel’s 10nm process). As a result, a lot of companies dropped out, and at the bleeding edge we’re left with 3 main players: Intel, Samsung, and TSMC.
Currently, TSMC has the best process – right now it’s being used for the new iPhone Pro and Apple M3 series and should expand to more products from AMD and and Nvidia by the end of the year.
There’s also one main company left producing the machinery to make these highly advanced nodes economical: ASML. These machines are very complex, expensive, and limited in quantity per year.
TSMCs leadership role isn’t a guarantee. Intel and Samsung aren’t THAT far behind, and Intel in the last few years has dumped tremendous amounts of money into R&D (more than AMD, Nvidia, and TSMC combined) in an effort to close that gap. Intel claims they will take leadership from TSMC within the next 18 months of so (but this is certainly not a guarantee and remains to be seen).
Another aspect is that Intel is only now just beginning to open their fabs to external design companies. For a long time, companies like AMD, Qualcomm, Nvidia, etc. Went with TSMC because they were the best available for them. A few years ago, Global Foundries was close enough to be considered, but they’ve since dropped out of the leading node market, and last gen Nvidia sourced from Samsung because their 8nm node was “good enough” and cheaper than TSMC’s 7nm node and Nvidia was able to compete due to their extremely good architecture design that offset some of this discrepancy.
The best analogy I can give you is putting screen protectors onto phones. Bubbles are the result of a tiny piece of dust that you cant see. That’s why it’s so hard to put a screen protector on without bubbles. Now imagine a Walmart sized warehouse where the entire place must not have a single spec of dust, and trying to put a warehouse sized screen protector onto a giant phone. That’s how difficult it is to build chips. The equipment is super sensitive. An extra microscopic drip of moisture in the air will result in a laser going off course and burning something in the wrong place. Equipment like this is super expensive, and years to build by hand. Even if you can put together a facility, you need to do it quickly enough where your equipment is not obsolete by the time it’s done. Someone will be the leader. TSMC is the leader today, but it may not alway be the case.
TSMC, the company in question doesn’t design chips, and is dependent on a Dutch company for the machines.
That’s not to say they don’t have their own process, one that’s given them a competitive edge, but it’s not like other “foundries” (the name for this type of company) couldn’t achieve the same result next year. TSMC has been ahead of their competition, but they do have competition.
Said Dutch company (ASML) however does not. No one can make current gen high end chips without a machine from Eindhoven, and despite the Chinese stealing company secrets, that’s unlikely to change any time soon.
As other responders have said, it’s not that other vendors don’t have leading edge transistor technology. So what TSMC does can, to a degree, be replicated. But what is very difficult to replicate is the combined *volume* and *reliability* at which TSMC does it. It’s a weird side-effect of semiconductor manufacturing: the more volume (number of wafer starts) you have, the more reliable (higher yield) the semiconductors produced will be. TSMC has been a leader at this for 30 years, putting a steady percentage of their profits into technology and reliability improvements that bring them more and larger customers, which bring them higher profits and … around it goes. The only other companies which achieve a similar degree of volume and quality are the 3 remaining DRAM and Flash makers: Samsung, SK Hynix and Micron. There are no non-DRAM, non-Flash foundries that are better than TSMC in terms of volume and reliability.
Its not
TSMC is a factory / machinery provider, other people buy time on its machinery and make THEIR designs.
TSMC doesn’t design chips, it simply mass produces them cheaply and reliably.
It also doesn’t make the machines it makes chips with, it buys them.
So REALLY, TSMC just buys a huge amount of chip making machines, employs a very skilled workforce to use said machines, and leases those machines operational hours on favourable rates to others.
Chip foundries are expensive and to be profitable you need to run them 24/7/365
Intel makes 70% of the worlds PC’s it can run its fabs none stop, AMD makes 20%, better and cheaper to forward order hours for new products then pick up slack hours for the back orders.
You’ll often find this with very specialized knowledge. Once a company has it setup, the barrier to entry is so high that not too many other people are doing bother even trying to get into that business. This is especially true if the business is pretty open.
What I mean by that is TSMC (The Taiwan) company will make the computer chips for anyone. If you’re a US company and want to make a chip. You send TSMC the design and the money and they will make it for you. They’re very open.
You couldn’t do this with Intel (at least historically). Intel only chips for Intel.
So when AMD (Intel’s competitor) wanted to make chips, they just sent their design to TSMC instead of building their own chip factories. TSMC grew really fast and powerful like this because they kept improving their process, having specialized knowledge, and making chips for anyone.
As others have said, Samsung and Intel both have similar knowledge.
It may not be the case forever. There has been some tension between China and USA/Taiwan and there were some restrictions on the kind of chip TSMC could make for China. Now there is an incentive for China to be able to make it’s own chips. So China has been investing heavily trying to duplicate the process. The USA is also trying to get more chip production in the USA itself as it doesn’t want to be so reliant on Taiwan in case stuff happens.
Your understanding ist wrong. ASML ist the only company that makes the machines to produce chips. It’s a durch company.
So all the world ist not dependend on a taiwanese company. It’s a dutch company.
‘greatest chips’ is misleading because lots of different chips do lots of different things, and furthermore more- are made in lots of different ways.
they may have one specific chip set or chip process that is better than the rest of the market- but they are not better at everything everywhere.
Sorry for being a bit off topic, but does this make Taiwan strategically important? Am I right in thinking that if China occupied Taiwan, they would get access to a lot of tech they don’t currently have?
I think it’s worth mentioning that TSMC and other manufacturers do actually use Dutch ASML machines to manufacture 3 and 5nm chips.
That’s not really correct. All the top tier chip manufacturers use pretty much the same machines and put their own process over that machine.
They are however the largest.
I talked to a Taiwanese guy who works at TSMC about this a couple days ago. His belief was that not only does TSMC have all the most skilled people, but it is easier to run a chip factory with Asian culture. The production requires highly skilled people to follow instructions and process exactly as described.
At first I thought this was a bit of an overindulgence in cultural differences. Then he pointed to the fact that Arizona workers have protested before the factory is even open as proof of his job security….