TSMC is worth $1 trillion - why the Taiwanese chip maker is important and what challenges it faces

On Monday, the Taiwanese semiconductor giant TSMC briefly joined the small club of companies worth over $1 trillion. Over the past almost four decades, TSMC has become one of the most important companies in the world - a leader in chip production, on which the majority of all electronics in the world operate.

Thanks to the revolution in artificial intelligence, TSMC has faced a huge wave of demand for processors needed for the training and operation of AI programs. The company collaborates closely with NVIDIA, which was recently the most expensive company in the world with a market capitalization of around $3.3 trillion. TSMC also supplies chips to NVIDIA's competitors, Qualcomm and AMD. The company's most famous client is Apple, which orders iPhone chips for MacBook. The demand for TSMC chips is so high that production is fully booked for many years.

"We have created a research line for technologies that will allow the use of advanced devices, schemes, and artificial intelligence systems for decades to come," TSMC reports.

Taiwan, where the company is located, is one of the most important links in the semiconductor supply chain, a key state for the global economy. However, China considers the island its territory and does not rule out the use of force to bring it under its control. U.S. Trade Minister Gina Raimondo stated at a Congressional hearing in May that the consequences of China's invasion of Taiwan and the capture of TSMC would be "absolutely devastating."

"Currently, the United States buys 92% of its advanced chips from TSMC in Taiwan," the minister said.

Under pressure, TSMC wants to diversify its production to protect itself from conflict. It is building two factories in the United States and announced plans for a third in April, with total investments in the state of Arizona up to $65 billion. But last year, its projects in the U.S. faced obstacles, which the company explains were due to a shortage of human resources, as chip manufacturing requires highly specialized skills.

This year, TSMC also launched an $8.6 billion factory in Japan. The project is crucial for the country as it competes with the United States and Europe in attracting chip manufacturers with huge subsidies. With the support of the Japanese government, TSMC announced a second factory for the production of more advanced chips. The firm also plans a new factory in Germany - its first in Europe.

Geopolitics is not the only concern for TSMC and Taiwan's chip industry. The island is also vulnerable to natural disasters. It is located on the "Ring of Fire," an arc of intense seismic activity along the Pacific region, and, like neighboring Japan, has a long history of catastrophic earthquakes. TSMC was one of the companies that halted production due to a 7.4 magnitude earthquake in April of this year, the strongest in decades in Taiwan. The company said the impact from the earthquake was minimal. TSMC has invested in seismic stability features at its facilities.

Source: Techxplore