1. TSMC's "chip dream" has encountered difficulties
Over the years, TSMC has been a global leader by virtue of its technological advantages in the field of semiconductor manufacturing. Recently, however, there have been some troubling signs, and TSMC seems to be going through a critical turning point.
The progress of building factories in the United States is slow
Under the strong promotion of the Biden administration, TSMC once ambitiously announced the construction of advanced wafer factories in the United States. This is regarded as an important step in TSMC's global layout, and it has also been highly valued by the U.S. government. However, the process proved not to be smooth sailing.
According to reports, TSMC's wafer fab construction progress in the United States is obviously slow, not only did it not receive the expected government subsidies, but the problem of brain drain is even more prominent. This can be said to be a "bumpy journey" for TSMC to invest in the United States.
The reason for this is, on the one hand, the intervention and restrictions of the US government; On the other hand, TSMC itself is also facing the impact of the decline in the global semiconductor market demand. Even under the banner of "Made in America", in this context, TSMC's American dream is difficult to be smooth sailing.
Announced the suspension of the construction of the U.S. plant
Faced with this dilemma, TSMC finally made a key decision: to suspend the fab construction program in the United States. As the world's largest wafer foundry, TSMC's move has undoubtedly attracted widespread attention.
Some analysts pointed out that this means that TSMC is re-examining its global development strategy. On the one hand, the U.S. market has been disrupted by political factors, which has brought a lot of uncertainty to TSMC; On the other hand, the overcapacity problem of the global semiconductor industry has also put TSMC under pressure.
In this context, TSMC chose to open new wafer factories in Japan, Germany and other places, which seems to be the "abandonment" of the US market, but in fact reflects TSMC's strategic wisdom in dealing with complex situations.
Earnings expectations have been downgraded
In addition to the setbacks in the United States, TSMC's global operating conditions have also raised some concerns. The company's recent announcement that it has lowered its global foundry output growth forecast from 20% to around 14% is undoubtedly dismal news.
This downward revision reflects that the entire semiconductor market is facing a severe overcapacity problem. Not only TSMC, but also industry giant ASML's lithography machine shipments have also dropped sharply, which further proves the overall sluggish status quo of the semiconductor industry.
It can be said that TSMC, the once soaring "semiconductor giant", is now unable to escape the crisis faced by the entire industry. It had to readjust its global layout and development strategy to cope with the complex and volatile market environment.
2. Key challenges faced by TSMC
TSMC's predicament in this critical period is ultimately due to two key factors: the "reversal" of the global semiconductor market situation and the heavy pressure from the US government.
Overcapacity in the global semiconductor market
In recent years, the global semiconductor industry has experienced a round of rapid development, and major manufacturers have expanded their production scale to meet the growing demand. However, this overextension is now in turn a burden to the industry.
The decline in market demand has directly led to the emergence of overcapacity. In the case of ASML alone, its lithography machine shipments in the first quarter of 2024 fell by 54 units, sending a clear signal to the market: the entire semiconductor industry is facing a grim situation.
For TSMC, this means that its global expansion plans will have to be forced to adjust. After all, in the context of overcapacity, it is difficult for any company to maintain sustained and high-speed growth. This not only requires TSMC to optimize its production capacity layout, but also requires it to better grasp market trends and adjust its development strategy.
Strong intervention by the U.S. government
Coincidentally, TSMC's investment plan in the United States has also encountered a lot of resistance from the political level. In fact, this is closely related to the U.S. government's strategic layout of the semiconductor industry.
The Biden administration has vigorously promoted TSMC to build factories in the United States and provided huge financial subsidies. However, this approach proved to have not had the desired effect. Not only did TSMC not receive a penny of subsidies, but the progress of its factory construction in the United States was also worryingly slow.
Behind this is the strict control of the semiconductor industry by the US government. As a core technology field related to national security, the US government is obviously unwilling to allow "foreign" companies such as TSMC to easily gain dominance. Therefore, it often adopts various means to intervene and even hinder TSMC's development in the United States.
It can be said that TSMC has to deal not only with the reversal of the global market situation, but also with strong intervention from the US government. This undoubtedly increases the complexity and uncertainty in formulating its global development strategy.
3. TSMC's response strategy
In the face of the current difficulties, TSMC has begun to take a series of countermeasures to try to rediscover its own development path.
Expand into new market layouts
In response to the challenge of overcapacity, TSMC decided to suspend the construction of factories in the United States and instead began to build new fabs in Japan, Germany and other places. This is obviously a major adjustment of its global strategic layout.
By further expanding its market share in Japan, Germany and other places, TSMC hopes to diversify its own capacity risks and alleviate the overall overcapacity situation that the industry is currently facing. At the same time, the scientific and technological strength of these regions also provides TSMC with new growth points and development space.
It can be said that TSMC is trying to find new market growth poles through this initiative to make up for the setbacks encountered in the United States. This undoubtedly requires TSMC to reorganize and adjust its global layout and give full play to its competitive advantages in different regions.
Strengthen cooperation with the mainland market
It is worth noting that TSMC CEO Wei Zhejia recently personally led a delegation to visit major customers in the mainland market. This seems to indicate that TSMC is re-examining and strengthening its cooperation with the mainland market.
As the world's largest semiconductor consumer market, mainland China has huge development potential. For TSMC, which is now facing the pressure of overcapacity, the mainland market is undoubtedly a "virgin land" that needs to be developed urgently. By strengthening ties with mainland customers, TSMC may be able to find new growth points and alleviate its current business difficulties.
In addition, the technical strength of the mainland market is also improving, which brings new cooperation opportunities for TSMC. There is a view that TSMC can consider carrying out more in-depth technical exchanges and cooperation with local semiconductor companies in the mainland to jointly promote the upgrading of the industrial chain.
Overall, embracing the mainland market is undoubtedly the key to TSMC's current development strategy. Only by making full use of the huge potential of the mainland market can TSMC find new space for survival and development in the complex and changeable global landscape.
Increase investment in technology research and development
In addition to expanding its market layout, TSMC is also increasing investment in technology research and development. This is undoubtedly another key step to address the challenges of the industry.
The semiconductor industry has always been regarded as a technology-intensive industry, and the ability of technological innovation directly determines the competitive position of enterprises. For TSMC, maintaining its technological leadership is fundamental to maintaining its market position.
As a result, TSMC is significantly increasing its R&D investment to drive breakthroughs and applications of new technologies. This will not only help to improve the performance and quality of its products, meet the increasingly diversified needs of customers, but also enhance its voice and competitiveness in the industry.
At the same time, TSMC is also actively seeking technical cooperation with other companies to jointly respond to the increasing competition in the industry. This open and collaborative innovation model will surely bring new development momentum to TSMC.
It can be said that technological innovation is the key support point for TSMC to cope with the current crisis. Only by continuing to push for technological advancement can TSMC find a solid foothold in the rapidly changing market environment.
Optimize the layout of production capacity
In addition to expanding new markets and increasing R&D investment, TSMC is also actively optimizing its own capacity layout to cope with the overcapacity problem faced by the current industry.
On the one hand, TSMC is adjusting the layout of its global production bases to better meet the needs of different regional markets. As mentioned earlier, it has chosen to build new fabs in Japan, Germany, etc., to diversify its own capacity risk.
On the other hand, TSMC is also optimizing its internal production process to improve overall production efficiency. This not only helps to reduce manufacturing costs, but also provides a buffer against fluctuations in market demand.
At the same time, TSMC has also strengthened cooperation with other wafer foundries to achieve off-peak utilization of production capacity. This method can not only alleviate the pressure on its own production capacity, but also contribute to the common development of the entire industry.
It can be said that TSMC is trying to cope with the current overcapacity dilemma faced by the industry through multi-dimensional capacity optimization measures. This is critical for its sustainable future.
Fourth, the far-reaching impact on the industry
As a leading company in the global semiconductor industry, TSMC's strategic adjustment will undoubtedly have a profound impact on the entire industry.
Promote the reshuffle of the industry
TSMC's strategic adjustment will first accelerate the reshuffle of the entire semiconductor industry. As an industry giant, TSMC's movements will inevitably trigger a chain reaction of other companies.
In the context of overcapacity, those weaker small and medium-sized enterprises may not be able to withstand the fierce market competition and will face the risk of withdrawal or even merger. Leading companies such as TSMC may further expand their market share and voice in the industry.
This reshuffle will undoubtedly increase the concentration of the entire industry and accelerate the reshuffling and integration of the industry. This is undoubtedly a severe test for those businesses that cannot adapt to market changes.
Promote technological innovation
At the same time, TSMC's measures to increase R&D investment will also promote technological innovation in the entire semiconductor industry. As a technology leader in the industry, TSMC's innovative achievements will surely lead the technological development direction of the entire industry.
With the continuous emergence and application of new technologies, the performance and functions of semiconductor products will continue to improve to meet the diversified market demand of the downstream. This is not only conducive to the upgrading of the industry itself, but also brings new development opportunities for related application fields.
To sum up, TSMC's strategic adjustment is undoubtedly a key turning point. It is not only related to TSMC's own future, but also will profoundly affect the pattern and trend of the entire semiconductor industry.
5. Summary and outlook
To sum up, in the context of the "reversal" of the global semiconductor market situation, TSMC is facing unprecedented severe challenges. Whether it is the predicament encountered in the United States or the pressure of overcapacity, TSMC must re-examine and adjust its development strategy to cope with the rapidly changing market environment.
From expanding new market layouts, strengthening cooperation with the mainland market, to increasing investment in technology research and development, and optimizing production capacity layout, TSMC is striving to find new space for survival and development through multi-pronged measures. This undoubtedly reflects its strong adaptability and market insight.
It should be pointed out that TSMC's strategic adjustment is not only related to its own future, but will also profoundly affect the pattern of the entire semiconductor industry. It will surely promote the further reshuffle and integration of the industry, and will also promote the continuous emergence of technological innovation. This will surely inject new impetus and vitality into the entire semiconductor industry.
In the future, with the continuous progress of science and technology and the continuous change of market demand, TSMC can only continue to maintain its leading position in the fierce market competition by keeping up with the pace of the times and continuously optimizing its own development strategy. At the same time, it also needs to further strengthen cooperation with other countries and regions to make due contributions to the common development of the global semiconductor industry.
In short, TSMC's current strategic adjustment is undoubtedly a key turning point. It will not only affect TSMC's own development direction, but also trigger the reshaping of the entire semiconductor industry pattern.
In this process, TSMC needs to give full play to its technological advantages and continuously improve its innovation capabilities. Only by keeping up with the changes in market demand and continuing to promote technological upgrades can TSMC maintain its leading position in the fierce competition.
At the same time, TSMC also needs to further strengthen cooperation with other countries and regions to jointly promote the healthy development of the global semiconductor industry. This not only requires TSMC to actively embrace the mainland market and carry out in-depth cooperation with local enterprises, but also requires TSMC to actively integrate into the international industrial chain to achieve mutual benefit and win-win results.
Needless to say, TSMC's current challenges won't be solved overnight. It needs to go through a long and difficult adjustment process. However, as long as TSMC can seize the opportunity and take the initiative to respond to the challenge, I believe that it will eventually find its own development path again and continue to contribute to the global semiconductor industry.
Currently, TSMC is standing at a new crossroads. Regardless of what the future holds, it must be well prepared to respond to the rapidly changing market environment. Only in this way can TSMC stand tall in the changing situation and continue to write its own wonderful chapter.