AuthorSpencer Chen

• Intel’s integrated model of designing and manufacturing its own chips enabled it to have high margins, but it was disrupted by the rise of modular chip companies like TSMC.
• TSMC created a new market for chip designers by enabling them to start their own companies without needing to build their own fabs.
• ASML’s 300-nanometer process and extreme ultraviolet lithography machines enabled TSMC and Samsung to increase their output and margins, and eventually forced Intel to become a customer.
• ASML’s EUV machines are made of over 100,000 parts, cost approximately $120 million, and require over 800 suppliers, including Zeiss and TRUMPF.
• In 2012, TSMC, Intel, and Samsung all invested in ASML to help the company finish the EUV project.
• TSMC had three reasons to commit to EUV: a multi-decade relationship with ASML, the need to manufacture smaller lots of greater variety, and Apple’s willingness to pay for the fastest chips.
• China has the challenge of re-creating the foundry supply chain from the ground up, but has three advantages: it is easier to follow a path than to forge a new one, it has benefited from technological sharing, and it has unlimited money and motivation.
• China is also building up its trailing edge fabs, which are still using U.S. equipment, and is likely to become the largest supplier of these chips.
• The Biden administration’s sanctions are designed to not touch this part of the industry, but this creates a new liability for the U.S. and more danger for Taiwan.
• In the long run, the U.S. may have given up a permanent economic advantage, and in the short run, the chip ban has raised the risk of conflict between the U.S. and China.

Click HERE for original. Published October 25, 2022