2 Reasons Taiwan Semiconductor Has The Jump On Intel

Michael Fitzsimmons profile picture
Michael Fitzsimmons
19.66K Followers

Summary

  • Taiwan Semi has leaped over Intel as the technology leader in semiconductors. TSMC is now at least one generation ahead - more likely two.
  • But Intel has another problem: the phasing out of the x86 architecture across an increasing number of critical applications.
  • As a result, Intel (and the US in general) has a "big lift" in front of it to return to the leading edge of semiconductor technology. It will take years.
  • TSMC plans to open a new 12" fab in Phoenix. Meanwhile, it will dominate and thrive for many years to come.

Source: TSMC

Taiwan Semiconductor Corp (NYSE:TSM), or "TSMC", is the world's largest and best semiconductor foundry with a 57% share of the global foundry market - a market it started in 1987. TSMC processed over 12 million 12" equivalent wafers last year, many of them at the leading-edge 7nm technology node - for which it recently was named the winner of the 2021 IEEE Corporate Innovation Award.

The company has left Intel (INTC) in the dust when it comes to semiconductor leading-edge technology. As if that isn't a big enough hurdle for Intel, it has another problem to overcome: the coming obsolesce of its x86 architecture. The combination of these two hurdles means that TSMC is likely to dominate the semiconductor market for the next few years, and likely much longer.

Technology Matters

Semiconductor competition typically comes down to a handful of metrics that separates the winners from the losers: performance, power, density and yield (i.e., cost). At the end of the day, most all of those metrics are intertwined and come down to who can manufacture the smallest "fin field effect transistor", or FinFET:

Source: Wiki

Commercial FinFETs were available in the early 2010s and became dominant at the 14nm, 10nm, and 7nm process nodes. TSMC began producing 7nm-based 256 Mbit static-ram devices in 2016 - two years before Samsung began mass production. TSMC is now producing processors at the 5nm node and has left Intel at least one generation behind (if not two):

Source: ARK Invest "2021 Big Ideas" (available here).

This is important because if a semiconductor company can reliably (i.e., high yield) manufacture at the smallest dimension technology node, that company can typically offer the highest-performance, lowest-power solutions to the market. And in an age where processor speed and power are prime considerations (whether we are discussing an Apple (

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This article was written by

Michael Fitzsimmons profile picture
19.66K Followers
Technology stocks, ETFs, portfolio strategy, renewable energy, and O&G companies. Primary goal is growing net-worth. I typically allocate a portion of my own portfolio and devote some of my SA articles to small and medium sized companies offering compelling risk/reward propositions. I am an Electronics Engineer, not a qualified investment advisor. While the information and data presented in my articles are obtained from company documents and/or sources believed to be reliable, they have not been independently verified. Therefore, I cannot guarantee its accuracy. I advise investors conduct their own research and due-diligence and to consult a qualified investment advisor. I explicitly disclaim any liability that may arise from investment decisions you make based on my articles. Thanks for reading and I wish you much investment success!

Disclosure: I am/we are long SMH AMZN GOOG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am an electronics engineer, not a CFA. The information and data presented in this article were obtained from company documents and/or sources believed to be reliable, but have not been independently verified. Therefore, the author cannot guarantee their accuracy. Please do your own research and contact a qualified investment advisor. I am not responsible for the investment decisions you make.

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