PSMC chairman Frank Huang has long been known in the IT industry as a very unique personality, or even a cat with nine lives. Huang has plans to invest NT$300 billion (US$10.81 billion) to build an industrial park for the semiconductor industry in the Taiwanese county of Miaoli. But he is planning to build fabs of mature node processes rather than advanced processes like 7nm or 5nm.
Huang is convinced that it is not a problem to satisfy demand from traditional 3C sectors. But there is a gap to fill for the emerging demands of new EV markets. This echoes what I have emphasized: The balance of demand-and-supply is gone. The global market demonstrated an unparalleled "balance" among funds, income, and 3C related products after the financial disaster in 2008. The manufacturers could project the general market demand of next year from the previous year's sales pattern. For semiconductor shipments, 38% would go to the computing sector, 31% to communications, and about 10% each to the automotive, industrial control, consumer electronics sectors.
The two major categories of computing products were PCs and servers from 2008 to 2020. Since Taiwan vendors control more than 80% of the world PC and server production, they were familiar with the supply and demand structure. The imbalance between supply and demand was mainly attributed to seasonal fluctuation. Handsets were the major communication products. The concentration ratio of iconic brands like Apple and Samsung continued to rise. It would not be difficult to reach a balance through communication between the supply and demand sides since the supply-demand structure was similar to that of notebooks'. Generally, there wouldn't be much noise out of the market if demand for some key components requiring advanced processes, such as microprocessors, could be satisfied.
During this period, TSMC's process node progress and yield rates were second to none and played a key role in the competition for market share among Nvidia, AMD, MediaTek and traditional US design houses. Since these upstream IC design companies embraced TSMC's advanced processes, the US-based Intel and Qualcomm suffered.
From 2020 onwards, this pattern of supply and demand seems to be changing. Advanced processes are being satisfied, but there is a demand gap for mature processes because of conservative investments in the past. The COVID-19 outbreak disrupted the supply-demand pattern in the market. During the US-China trade war, Chinese firms were scrambling for supplies, hoarding all kinds of components for production of mobile phones, servers and cars. Semiconductor makers must satisfy demands of traditional components and deal with demands of new smart applications like AI chips. The demand for EVs is related to new generations of semiconductors such as SiC, which would certainly pose more challenges for the vendors. Thus, Huang said that of all kinds of semiconductors, the two most expensive ones are not the issues; rather, the problem is the general components. That echoes Foxconn's constant talk about semiconductors for EVs.
Though many fabs come with more advanced process nodes than 28nm, demand for mature processes can be far greater. This could be TSMC's paramount concern but one that is out of its reach. The most worrisome is that the backlog of orders requiring traditional processes may destablize the overall supply-demand ecosystem, and come back to undermine TSMC's sales of advanced processes.
The butterfly effect can happen any time in the new era of post-globalization. The notebook, handset and EV industries are vulnerable to shortages of power management and audio ICs. Huang is betting on business opportunities arising from possible shortages of components requiring mature manufacturing processes.
The semiconductor industry is one that gathers together a lot of elite. Each industry leader is unique in some way, and people from other industries may get inspiration from them in one way or another.
(Editor's note: This is part of a series of analysis of Taiwan's role in the global ICT industry.)
