Taiwan Semiconductor Manufacturing Company (TSMC) briefly joined a rarefied club of companies valued at more than $1 trillion on Monday, reflecting its monumental influence on the global tech industry. With most of its factories based in Taiwan, TSMC is poised to reap significant rewards from the ongoing artificial intelligence (AI) frenzy.
Here are five essential things to know about TSMC:
MIT and Stanford graduate Morris Chang founded TSMC in 1987 after an extensive tech industry career in the United States. Taiwan’s government was aiming to establish a competitive semiconductor industry to rival leading nations like Japan.
Since its inception, TSMC has emerged as a pivotal player in the global tech landscape, producing chips that power everything from smartphones to advanced robotics. Chang, born in mainland China in 1931, retired from TSMC in 2018 and is revered in Taiwan as the “godfather” of its chip industry. In April, Taiwan awarded him one of its highest medals of honor.
The revolution in artificial intelligence, exemplified by the success of ChatGPT, has fueled massive demand for advanced semiconductors, propelling TSMC to new heights. The company collaborates closely with AI leader Nvidia, which became the world’s most valuable traded company in June with a market capitalization of around $3.3 trillion.
TSMC also supplies chips to Nvidia’s competitors, including Qualcomm and AMD, with production reportedly booked years in advance. Arguably its most famous client is Apple, which depends on TSMC chips for its latest iPhones and MacBooks. “We have established a research pipeline for technology to enable leading-edge AI devices, circuits, and systems for decades to come,” TSMC states on its website.
Taiwan plays a crucial role in the global semiconductor supply chain, with TSMC being its crown jewel. However, China claims Taiwan as its territory and has not ruled out using force to bring it under control.
Beijing’s increased military pressure on Taipei has raised concerns worldwide about the stability of the chip industry. US Commerce Secretary Gina Raimondo told Congress in May that a Chinese invasion of Taiwan and seizure of TSMC would be “absolutely devastating,” noting that 92 percent of the United States’ leading-edge chips come from TSMC in Taiwan.
To mitigate risks associated with its Taiwan-centric operations, TSMC is expanding globally. It is constructing two manufacturing plants in the United States, with plans for a third, bringing its total investment in Arizona to $65 billion.
Despite facing challenges, such as a shortage of skilled labor, TSMC is also investing $8.6 billion in a plant in Japan and planning a second facility with strong Japanese government support. Additionally, TSMC is preparing to build its first European factory in Germany.
Geopolitical tensions aren’t the only concerns for TSMC. Taiwan is also susceptible to natural disasters. Located on the “Ring of Fire,” the island experiences significant seismic activity, much like neighboring Japan.
In April, a 7.4-magnitude earthquake, the most severe in decades, forced TSMC to halt production temporarily. The company assured customers that the impact was minimal. TSMC has invested in various seismic resistance measures, including an earthquake early warning system, to mitigate damage and casualties.
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