If chips are the new oil of the current era, then it pays to hear from the chip chiefs such as TSMC Chairman Mark Liu.
He revealed plenty about the U.S. desire to boost domestic chip manufacturing after decades of neglect in a rare and extraordinary interview on "60 Minutes." Liu said U.S. companies and the government should not focus on the costly process of shifting the chip supply chain to the U.S. and instead pay more attention to R&D and global collaboration.
Some background: The Biden administration and much of Congress is focused on the CHIPS Act and providing $50 billion in incentives and tax relief to build chip fabs in the States, while Intel recently said it would invest $20 billion in two fabs in Arizona and another $3.5 billion in a fab in New Mexico.
Meanwhile, TSMC in Taiwan is also planning an Arizona fab as well as a $100 billion investment in chip production expansion over the next three years. With 70% of chip production conducted in Asia, the question of “rebalancing” the chip supply to the West and the U.S. came up.
“60 Minutes” correspondent Leslie Stahl asked on Sunday’s broadcast: “Should Americans be concerned that most chip are being manufactured in Asia today?
TSMC Chairman Mark Liu responded: “I understand their concern first of all. But this is not about Asia or not Asia. I mean, the [recent chip] shortage will happen no matter where the production is located because its due to the Covid.”
Stahl: “But Pat Gelsinger at Intel talks about a need to rebalance the supply chain issue because…so many of the chips in the world now are made in Asia.”
Liu: “I think the U.S. ought to pursue to run faster, to invest in R&D, to produce more Ph.D., master, bachelor students to get into this manufacturing field instead of trying to move the supply chain which is very costly and really non-productive. That will slow down innovation because [of] people trying to hold on their technology to their own and forsake the global collaboration.”
To be fair, the Biden administration and Congress are suggesting a variety of government-led R&D initiatives to affect chip research and many other vital supplies either in the CHIPS Act authorization or Biden’s $2 trillion infrastructure plan. But Biden has said that spending broadly on U.S. R&D has fallen to less than half what it was decades ago.
Also, Intel CEO Gelsinger has said he wants to invest more in Intel’s R&D and focus less on stock buybacks than in the past. That was a condition of his employment as the recently installed CEO.
The bigger picture with Taiwan and TSMC is its vital role in making advanced chips for smartphones for Apple and many other companies, including Intel, which do not yet have the know-how to compete for the most advanced chips.
TSMC served 510 global customers in 2020 as a pure-play fab (meaning it did not design the chips itself), manufacturing 11.617 products with 281 distinct process technologies. It is worth half a trillion dollars and by any measure is huge. It was the first foundry to provide 5-nanometer production capabilities, something out of reach of Intel and other U.S. companies.
Stahl also asked Liu about threats from Communist China on Taiwan, a democracy, and indirectly on TSMC as an important part of Taiwan’s economy. Taiwan is a key U.S. ally and has served as a check on China expansion for years. Because of silicon’s importance to Taiwan and Taiwan’s importance to democracy in the rest of world, the island nation has been dubbed the “Silicon Shield.”
Asked to define what Silicon Shield means, Liu answered: “That means the world all needs Taiwan’s high-tech industry support. So, they will not let the war happen in this region because it goes against interest of every country in the world…This is a changing world. Nobody want these things [like war] to happen. I hope not…either.”
Aside from Taiwan and TSMC’s role there, Liu said the company has beefed up auto chip production to meet a shortage, and sees the auto chip supply improving in about eight months. Gelsinger put the number closer to two years, a figure used by other chip CEOs in recent days.
If anything, the insight into the TSMC chair’s opinions shows how delicate and nuanced chips and their vital nature have become. The public (but not chip executives and insiders) for years forgot the importance of chips until the chip shortage reminded us. The role of China in relation to Taiwan and China in relation to the U.S. was not top news until former President Trump imposed big trade sanctions on China.
The Biden administration will have its Secretaries of State, Commerce, Defense and other departments sweating over chips, fair trade and foreign relations for years to come. The CEOs and boards of big semiconductor companies don’t often show when they sweat over these concerns, but they probably will do so as well.