The chip shortage of the past year is most often explained by the COVID-19 pandemic, but it’s not the whole story. There have been other discussions about trade capacity, shortages of longshoreman, trade wars, but this video from the Verge highlights a quirk in the semiconductor business that is worth spending some extra time on: the pitfalls of the world’s reliance on Taiwan’s foundries.
Taiwan is the leading fabricator for semiconductors. In 2020 around 60% of total global foundry revenue went to Taiwanese companies, but even more stunning is that 54% of total global foundry revenue went to just one company: Taiwan Semiconductor Manufacturing Company (TSMC).
TSMC builds chips for Qualcomm, Apple, Microsoft, Nvidia, AMD, Sony, and many others. As TSMC consumes more market share, its able to reinvest in fab technologies and push ahead of other in-house manufacturers like Intel and Samsung. Indeed, according to the Verge video even Intel is outsourcing some current and future fabrication to TSMC.
The problem with consolidation like this is of course what we are seeing now. A bottleneck at Samsung might only affect 15% of global production, but an issue with TSMC affects most of the supply chain.A virus can shut down a factory. Fires and drought threaten production. This is the kind of thing you see in commodity markets that are roiled by bad weather, and don’t expect to see in a seemingly diverse global technology industry.
There is some other good bits of information in the Verge video, which actually ends on a positive note and looks to a brighter future. Watch the whole thing here.