tsmc's dominance in chip manufacturing threatened

2025-05-18 tsmc

Taipei, Sunday, 18 May 2025.
taiwan’s control of the advanced chipset market is under fire. nations are fiercely competing for these vital resources. huawei and other chinese companies are quickly creating their own advanced chips. this poses a direct threat to tsmc’s market share. the taiwanese company currently produces over 60% of the world’s chips. can tsmc maintain its lead, or will new players reshape the industry?

Rising competition in chip manufacturing

TSMC’s dominant position is being challenged by nations recognizing the strategic importance of advanced chipsets [1]. These chips are essential for various industries, from electronics to military applications [1]. The ability to produce advanced chips is viewed as a critical asset, comparable to traditional resources like oil and water [1]. This has spurred increased competition and investment in domestic chip manufacturing capabilities, particularly from countries like China and the United States [1].

China’s push for self-sufficiency

Chinese companies, including Huawei, are aggressively pursuing the development of their own advanced chips [1]. This drive for self-sufficiency is motivated by a desire to strengthen its economic position and reduce reliance on foreign technology [1]. While reports suggest Huawei may be close to producing 3-nanometer chips, these capabilities are still largely in the experimental stage [1]. Success in this area could significantly impact TSMC’s market share and future growth prospects [1].

U.S. efforts to bolster domestic production

The United States is also actively working to enhance its chip manufacturing capabilities [1]. The U.S. government has partnered with companies like TSMC to establish factories within the United States, supported by initiatives such as the CHIPS and Science Act [1]. TSMC is reportedly on track to begin producing chips at its Arizona-based facility by the end of this year [1]. This move aims to safeguard U.S. economic interests and reduce dependence on foreign chip suppliers [1].

Geopolitical implications for tsmc

Taiwan’s central role in chip manufacturing has placed it at the forefront of geopolitical tensions, particularly between the United States and China [1]. TSMC’s facilities are highly complex, requiring specialized equipment and expertise [1]. The company relies on resources from various countries, including silicon and equipment from Europe [1]. Maintaining stable international relations and supply chains is crucial for TSMC to sustain its production capacity and market leadership [1].

Huang Renxun’s view on chip export controls

Nvidia CEO Huang Renxun addressed concerns about advanced AI chips potentially reaching China [3]. He emphasized that governments and companies purchasing Nvidia products understand the need for strict controls to prevent technology transfer [3]. Huang Renxun also noted that Nvidia’s systems, like the Grace Blackwell, are massive and easily traceable, making unauthorized transfers difficult [3]. He supported Trump’s decision to relax AI chip restrictions, arguing that expanding U.S. technological influence globally is vital for maintaining a competitive edge [3].

Taiwan’s energy challenges and nuclear debate

Taiwan faces energy challenges that could impact its semiconductor industry [2]. The decommissioning of nuclear power plants has sparked debate about energy policy [2]. President Lai Ching-te has indicated openness to accepting advanced nuclear power generation [2]. With renewable energy targets not yet met, ensuring a stable and sufficient power supply is critical for supporting TSMC’s energy-intensive manufacturing processes [2].

tsmc’s expansion plans and capital expenditure

TSMC continues to invest heavily in expanding its production capacity [5]. The company plans to allocate between 380 billion and 420 billion yuan in capital expenditure in 2025 [5]. These investments are aimed at constructing new facilities and upgrading existing ones to produce advanced chips [5]. TSMC plans to begin mass production of 2-nanometer chips at its Fab 20 and Fab 22 facilities [5]. These expansion efforts are crucial for maintaining its competitive edge [5].

fab 21 and advanced chip production

TSMC’s Fab 21 is playing a key role in its advanced chip production strategy [5]. The facility is initially focused on manufacturing 3-nanometer chips [5]. Equipment installation for A16/N2 chip production at Fab 21 began in April 2025 [5]. The company plans to use Fab 21 for both 2-nanometer and 1.6-nanometer chip production [5]. This expansion demonstrates TSMC’s commitment to staying at the forefront of semiconductor technology [5].

tsmc’s gigafab plans

TSMC envisions its Fab 21 complex as a GigaFab cluster, aiming for a production capacity of 100,000 wafers per month [5]. However, achieving this ambitious goal will require significant investment and overcoming various challenges [5]. The company plans to use Fab 21 Modules 3 and 4 for N2 and A16 node production, with operations expected to begin at a later date [5]. The timeline for these expansions depends on equipment availability and successful installation [5].

Bronnen

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