Daniel Slotta
Research expert covering fiance, real estate, and technology in Greater China
Get in touch with us nowThe Taiwanese chip giant
Taiwan Semiconductor Manufacturing Company crafted and maintained its market position by focusing its business model solely on the production of semiconductors. However, the semiconductor industry is very segmented. Fabless companies design the chipsets and market the final product. Another subsection of the industry only tests the final product and arranges the packaging process. Finally, so-called foundries produce the semiconductors and chipsets. Founded in 1987, TSMC decided not to manufacture any products under its own name, so that the company never engages in direct competition with its customers.Under this strategy TSMC became the world’s largest producer of semiconductors and the main supplier for large tech-companies. As the world’s semiconductor epicenter, Taiwanese foundries account for 65 percent of the global market and TSMC alone has a market share of 53 percent. Consequently, the company’s customers include many high-profile enterprises. Out of TSMC’s customers, around 26 percent of its total revenue comes from Apple alone.
Building blocks of the digital age
Almost every aspect of modern life relies on computers and microchips, and therefore also semiconductors. However, a large share of the production of semiconductors is concentrated in Taiwan which makes supply chains very fragile and, as a result, a small disruption can impact global production. When COVID-19 broke out, the demand for chips increased due to a higher demand for PCs and other electronics. In addition to that, the pandemic severely disrupted international supply chains. When other industries, such as the automobile industry, attempted to restart production but they were unable to source enough microchips. The result was a global chip shortage.Even before the pandemic, mainland China had designed a plan to develop a domestic semiconductor industry. From 2014 onwards, policymakers in Beijing primed domestic manufacturers towards achieving the ambitious goal of becoming the world’s leading semiconductor and chip manufacturer by 2030 and supplying 70 percent of domestic demand by 2025. So far, the production volume of integrated circuits had increased from around 100 billion pieces in 2014 to almost 360 billion pieces in 2021. The recent chip shortage will only put further pressure on manufacturers to achieve these targets.
