Ben Thompson wrote an article for Stratechery titled Political Chips (August 3, 2022).
« Last Friday AMD surpassed Intel in market capitalization… not a fair comparison: AMD, thirteen years on from its spinout of Global Foundries, only designs chips; Intel both designs and manufactures them. It’s when you include AMD’s current manufacturing partner, TSMC, that Intel’s relative decline becomes particularly apparent »
« TSMC manufactures chips for a whole host of companies beyond AMD. That, though, is precisely Intel’s problem. »
« The late Clay Christensen, in his 2004 book Seeing What’s Next, predicted trouble for Intel: ‘Intel’s well-honed processes… might inhibit its ability to fight for customers clamoring for customized products… Entrants without legacy processes could quite conceivably develop better proprietary processes that can rapidly deliver custom processors.’ »
« one of TSMC’s big advantages is its customer service. Given the fact that the company was built as a pure play foundry it has developed processes and off-the-shelf building blocks that make it easy for partners to build custom chips. »
« Gelsinger was right when it came to computers and servers, but not smartphones. There performance wasn’t free, because manufacturers had to be cognizant of power consumption. More than cognizant, in fact — power usage was the overriding concern…. Smartphones, though, provided a reason to build up the software layer from scratch, with efficiency, not performance, as the paramount goal. »
« The most important decision was shifting to extreme ultraviolet lithography at a time when Intel thought it was much too expensive and difficult to implement; TSMC, backed by Apple’s commitment to buy the best chips it could make, committed to EUV in 2014, and delivered the first EUV-derived chips in 2019 for the iPhone. Those EUV machines are made by one company — ASML. They’re worth more than Intel too (and Intel is a customer) »
« Chip manufacturing obviously has marginal costs, but the fixed costs are so much larger that the economics are not that dissimilar to software »
« Time will tell if my contention that an increasing number of nations will push back against American Internet hegemony by developing their own less efficient but independent technological capabilities is correct; one could absolutely make the case that the U.S.’s head start is so overwhelming that attempts to undo Silicon Valley centralization won’t pan out anywhere other than China, where U.S. Internet companies have been blocked for a generation. »
« Taiwan, you will note, is just off the coast of China. South Korea, home to Samsung, which also makes the highest end chips, although mostly for its own use, is just as close. The United States, meanwhile, is on the other side of the Pacific Ocean. There are advanced foundries in Oregon, New Mexico, and Arizona, but they are operated by Intel, and Intel makes chips for its own integrated use cases only. »
« The reason this matters is because chips matter for many use cases outside of PCs and servers — Intel’s focus — which is to say that TSMC matters. »
« China, meanwhile, is investing heavily in catching up, although Semiconductor Manufacturing International Corporation (SMIC), its Shanghai-based champion »
« This reality is why I ultimately came down in support of the CHIPS Act, which passed Congress last week. I wrote in a Daily Update: ‘This is why Intel’s shift to being not simply an integrated device manufacturer but also a foundry is important: yes, it’s the right thing to do for Intel’s business, but it’s also good for the West’ »
Articles of Interest 