It seems to be that than TSMC needs to increase their prices. They should be extracting more margin when compared to AMD, NVDA etc. They are just killing it. One of the main reasons with intc had better chips was they had the best Fabs.
Its kind of sad we used have guys like shockley, moore, kilby etc. The reason why silicon valley is called silicon valley. Now we are just falling behind Taiwan, south korea, and maybe china.
Specialization is a feature of global trade. Regions focus on specific industries to gain expertise and increase efficiency.
Specializations change over time. The US, specifically Silicon Valley, has different specializations today than it did in the 60's. A lot of the semiconductor specialization moved overseas, costs came down, and in general the world is richer. Other specializations include things like China and injection molding, Japan and mechatronic technologies in the 80's and 90's, Thailand and lenses, etc
Obviously the protectionist crowd would take issue with all this, but free trade theory is studied and applied all over in trade agreements, specialization zones (like Shenzen), etc. Generally speaking though, the cost of attempting to be self sufficient in everything (like semiconductor manufacturing) means closing borders to competitors outside, which eventually leads to inferior product. With robust competition, the consumer usually wins on both quality and price. Obviously there are other consequences, such as job migration etc. In general though, everyone is lifted up and made richer over time (evident by the fact that there is quantitatively less poverty in the world today and the 1960's and even the most poor can enjoy things like cellphones, leather jackets, and shoes that fit well that even the kings of a century ago could not). The system isn't perfect, but atleast in my eyes it is the one that does the most good for the most people.
Really? In the 1970's in the US it was possible to own a house and support a family of 4 on a single income in the manufacturing sector. It was also possible to work your way through college and exit with a degree and no debt, in a job market which made that worth it.
Yes global poverty has decreased, but the material standard of living has decreased for most people in the working class in the developed world, while wealth has skyrocketed for a select lucky few.
It's more complex than saying "everyone is made richer" - it seems what has happened is that a few people have been made much richer, and everyone else is somehow equalizing somewhere closer to the bottom.
>the material standard of living has decreased for most people in the working class in the developed world
Who told you that? Both inflation adjusted median personal and household income have increased by double digit percentages over the past 50 years. In the case of household incomes that still happened even with the shrinking average household size (i.e. number of people in a household).
You're not focusing on the other side of his statement, where costs for housing, healthcare and education have also skyrocketed, along with the development of the two income trap.
What he said isn't controversial for most academics studying this.
The average home size in the 1970s was 1,500 square feet. It’s around 2,700 square feet today. And the percentage with air-conditioning, two car garages, pools, dish washers, etc have increased significantly as well.
Go price out a 1500 sqft house built in the 1930s-1970s today and you'll see that it's still significantly more expensive than it's inflation adjusted price back then, especially in the larger cities where there are jobs. And that 1970s house today is less valuable than it was back in the 1970s too, but that is harder to evaluate in aggregate. Jobs also used to be more distributed, so the need to move was less back then.
AC & Dishwashers are also only a few thousand dollars of value, mostly on the AC side. The rest are relatively luxury items.
If 1,500 SF homes cost more now than they did in the 70s, how is the average person affording 2,700 SF homes today?
And low end AC & Dishwashers can be had for only a few thousand dollars NOW. Back in the 70s the cheapest ones were still expensive enough to require an upper middle class income.
> how is the average person affording 2,700 SF homes today?
They're not. Home ownership is currently at about the same level it was in the 90's, declining from a boom in the 2000's driven by sub-prime lending, but if you look at generational differences, everyone younger than baby boomers is basically owning homes at much lower rates.
Large TVs in 2020 cost just as much as small TVs did in the 70s (if not less), adding air bags to a car costs mere hundreds of dollars, and is ammortized over 20 years, and cancelling your phone plan is not going to let you support a family of four on a single blue-collar income. Shit, cancelling your phone plan won't even compensate for the annual growth in your health insurance premiums - which is something that compounds every year.
"Air bags is amortized over 20 years" Cars don't last 20 years, generally... 5-10. And airbags are one of hundreds of "improvements".
TVs are an example of the plethora of technology that most homes have. From microwaves to air conditioners to cell phones...
"Canceling one thing isn't going to support your family" Which is why I didn't mention one thing... I mentioned a handful of things. A host of "modern conveniences" that add up.
Education, health insurance and other things cost more? Those are also things that the government has stepped in to make more affordable as well... which is a massive topic in of itself.
My main point stands... quality of life and cost of life has risen with hundreds of costs that add up (a mere 100 for an air bag... a mere couple bucks a month for data on your phone... a mere 5 for text messages... a mere 100 for a microwave... etc.etc.etc.etc).
Remove all the "extra" stuff that's standard today compared to 50 years ago and even with outliers (IE Health Insurance), you'll still be much closer to being able to afford the same quality of life as "way back then".
The numbers don't add up. This is essentially the math which blames avocado toast for why millennials aren't buying homes. If the price of university has doubled relative to median wages in the past 50 years, you're going to have to buy an awful lot of smartphones every year to account for that difference.
What do you mean? The home ownership is on the decline, especially among younger people, and "one unit of education" (i.e. a bachelors') hasn't changed. Yes more people are going to university on average, but the price of higher ed is not regulated by scarcity.
Compare the output of an inflation calculator vs the price of health insurance, collage, or the average new home in 1960’s USA vs now. Different prices don’t move in lockstep with inflation.
So, inflation as calculated on a basket of goods divorced from living expenses gives inaccurate comparisons. Yes wholesale food prices for example got really cheap, but overall food is still a significant fraction of people’s budgets.
There is more to quality of life than income. Despite rising incomes, younger peopple lagging far behind in terms of wealth accumulation[1]
This may have something to do with the fact that the cost of housing has risen drastically as compared to median income over the past few decades[2]
While the cost of education has also more than doubled for men, and increased by 20% for women relative to median income (despite a 73% increase in median income for women) since the 70's[3]
Yes income is increasing, but the costs for the markers of a middle-class existence are increasing much faster.
I always figured that was because WW2 destroyed Europe, Russia and Japan, forcing the entire world to buy from us for 30 years. I don't think it's anything that can be replicated.
History definitely played a factor in the US's ascendance, but the current state of the US economy isn't just something which happened by accident. We could have implemented an economic policy designed to optimize the benefit to the middle-class, and to protect strategic interests (like the capacity to produce PPE for example) but that's not what we did.
Even Pearl Harbor caused minor damage, all things considered. I think many of the facilities were repaired and rebuilt within 1 year while many of the ships were actually recovered. The carriers weren't even there during the attack.
For the US it was a huge shock, for a country like Poland it was Tuesday.
> In the 1970's in the US it was possible to own a house and support a family of 4 on a single income in the manufacturing sector.
Modern expectations mean that this isn't what people think it is. You also owned one car per family in the '70s; new houses often have to build two parking spaces. Housing prices were held down because public housing was still being built; today it's unmaintained and often torn down. Old houses were built on small lots; suburbs today require a quarter-acre. Colleges received way more public funding as a proportion of their income than they do today, and enrollment was lower.
Housing has gone from subsidized to restricted and college has gone from subsidized to free-market while demand keeps rising. It's not surprising that the price increased. (And the protectionism lobby is now also the anti-housing lobby!)
You're arguing income inequality has worsened in spite of free trade, which is fine, but I think the original comment's point was that free trade carries some benefits, which is a separate argument altogether (that is, they are not asserting free trade is a panacea). It could be the case that some other cause has led to increased income inequality, which then would not affect the free-trade-has-benefits argument.
> Really? In the 1970's in the US it was possible to own a house and support a family of 4 on a single income in the manufacturing sector. It was also possible to work your way through college and exit with a degree and no debt, in a job market which made that worth it.m
This is more of a feature of the transition from a Bretton Woods/Treasury/politics-based monetary policy to neoliberal/central bank/finance-based one no? At 10% inflation, the creditors just ate most of your mortgage debt regardless of whether you worked in manufacturing or not.
Probably it was a combination of factors, but I imagine the transition to a service-based economy and the outsourcing of entire sectors of jobs relying on large pools of organized labor didn't help the situation
> Really? In the 1970's in the US it was possible to own a house and support a family of 4 on a single income in the manufacturing sector. It was also possible to work your way through college and exit with a degree and no debt, in a job market which made that worth it.
Since the 1970s, physical house size has increased from around 1600 sq.ft to around 2600 sq.ft. At the same time, house occupants has dropped from about 3 to about 2.5 [0]. In addition to that, the building requirements and safety features have increased costs significantly per square foot.
Average house price in 1975 was around 42k [1]. That is a little over 200k in 2020 dollars [2]. Doing some math with 200k/1600 vs 380k/2600 gives $125/sq.ft and $146/sq.ft or roughly a 14% increase in relative cost. In 1975, median income was around 12k [3] while median income in 2018 was around 63k [4]. (EDIT: I'd note that I'm being generous as home prices dropped significantly this year and I went with the higher numbers)
SHOCK!!!!
An average house in 1975 is 16.5x the yearly income while an average house in 2020 is only 6x yearly income despite being 40% bigger and 15% less occupied while being safer to live in as well.
I'll give you college debt, but for all the wrong reasons. The government artificially incentivizes bad loans. They insist that kids CAN'T get that 380k house loan (even though the house is collateral), but also insist that kids CAN get that same 380k for a piece of (often useless) paper without any collateral backing. Get rid of the stupid laws and you'll watch that problem go away all by itself. Get rid of the pressure to have a degree to sweep floors and you'll watch college prices fall even faster.
The government not only incentivizes bad loans, they also exempt college debt from the bankruptcy process. And these are loans people are supposed to agree to when they are 17-18 years old. It's an insane system if you ask me.
As a side-note, lately I've been curious about what's actually been driving the cost of higher education. I know it's often cited as "administrative costs", but what does that actually mean? Where does the money actually go?
> As a side-note, lately I've been curious about what's actually been driving the cost of higher education. I know it's often cited as "administrative costs", but what does that actually mean? Where does the money actually go?
If you're asking about tuition? A few places.
Marketing, sports stadiums, student services (Counselling, mental health, etc), bureaucratic waste (Middle managers overseeing operations people), overbuilt facilities that serve no pedagogical value (Stained glass windows and large, pretty university grounds don't maintain themselves).
But that's just the half of it. In addition to tuition, most universities force you to pay for room and board, by living on-campus. Those fees go into paying for overpriced, poor-quality catered food, and overpriced dorm rooms.
It is with the "cost" of hosting and medical care.
The world in general has a huge incentive in driving up asset prices. And Housing is one of the biggest asset.( Correct me if it is not the biggest ) And rent is the biggest expenses in living cost.
What needs to be done is fixing housing prices / supply.
I agree - I think housing functioning as an asset and also as a functional human need are conflicting interests. Like if food were also subject to speculation, this would cause a lot of suffering.
> Obviously the protectionist crowd would take issue with all this,
"We" (the US) still lives in a violent world, or at the very least a slow, soft violent world where soft power might cut us off from Taiwan.
I find the fact that one half of the "techno-elite" crowd thinks that giving up on hard problems is a long term feasible position. We must be able to manufacture and produce the absolute best fundamental technologies from a strategic standpoint, even if it isn't a core, market efficient concern.
The rest of the world is modernizing, dealing with modern problems (disease spread, high end technical manufacturing, green technology), and we can't even get out of our own way. Frustrating.
Agreed. We are the country that designed, created, and operated the SR-71 Blackbird, put a man on the moon, and built the Hoover Dam, among other incredible feats of organization, engineering, and manufacturing.
I fear as a country we are not capable of that type of thing any more and I am not only frustrated, I'm saddened.
BTW if anyone has any examples of more recent (post-2016) successes of a similar magnitude and impressiveness, I could definitely use a mood boost.
I would say Elon Musk via his development of Tesla (first modern viable electric car) and of SpaceX (first almost fully reusable low cost space solution). They are different "type" than the ones you quote, but the sheer magnitude and long term impact of both those companies will likely reverberate for decades to come.
Agreed, there are strategic complexities, more so now than ever before. I'm not attempting to make a pure argument for free trade vs protectionist - I'm merely making an argument why we should strive towards free trade policies rather than protectionist policies in the long run.
Also historically speaking, America (compared to some other governments and policy bodies in the world) doesn't generally over regulate or adopt policies on young industries. This is generally in the spirit of not quashing broad innovation too early.
To your point though, we are indeed struggling with modern problems. Many of our modern problems though are partially due to modern marvels. I for one am optimistic we will make progress in some of these areas.
If by the 'American Way' you're referring to capitalism, is there another substantially different system that has produced as much innovation, wealth, and prosperity over such a short period in human history?
Don't get me wrong, I understand the cynicism here. There is no perfect system, but I just don't know of one that has empirically produced better results. Certainly not socialism or communism.
War. Wartime has always been a fantastic generator of innovation. It unfortunately destroys mass amounts of capital and kills and wounds many people in the process.
> wealth, and prosperity
Charity and taxpayer-funded government investment. The Marhshall Plan dramatically improved the prosperity and efficiency of much of Europe and was paid for by US taxes. The Green Revolution was funded by the US, UN, and Rockefeller Foundation.
Capitalism is a valuable tool, but too many accolades are laid at its feet these days.
I am sick of 'communism is worse', it's a platitude that demonstrates poor understanding of economics.
Capitalism is not a singular thing, economic policy of the 30s, 60s and 2020s is very different. There are various schools of though: Shumpeterian, kensyan, neoliberal, austeian, etc. Lately neoliberal system has been dominant, and delivered remarcably poor results for most of us.
I'll be the first to admit that capitalist systems have had their failures, but communist systems have never had a success. Communism was tried in more than a dozen countries across a century, in different cultures, in different geographic regions, in societies with very different levels of technological development. Not once did it create a success like Japan or Singapore or the USA or Hong Kong. Heck, we even split two countries down the middle and ran one side communist and one side capitalist (Germany & Korea). In both cases, the communist side became a hellhole and the capitalist side wasn't a bad place to live.
oh my god, the entire point of my post is that bringing up communism is a red herring that totally derails the conversation and has no relevance.
We should be discussing the economic system we currently have and various ways it is / was / can be structured. Even the justice system, the cornerstone of civilised society, has been corrupted.
For example why is it that we have publicly funded police but not publicly funded lawyers that can actually hold firms to account for contract violations? Why do companies that pay no taxes enjoy priority when it comes to public prosecution over regular Joe. Why is it, that if I owe the state a few grand, I will be hauled before a court within a day, but if BigCorpX owes the state a few billion they get to negotiate a special tax deal with massive 'discounts'? The list is truly endless.
Very ironic mentioning semiconductors, when it was the protectionist US-Japan Semiconductor Trade Agreement pushed by Reagan that propped up the American semiconductor industry, while leading to the decline of the Japanese industry
Thank you for drawing my attention to this slice of US foreign policy history w.r.t. to high-tech.
“At the insistence of the United States, in 1986 Japan agreed to limit its exports of semiconductors, mainly the "dynamic random access memory" (DRAM) chips, to America. These chips are used in high-tech consumer electronics equipment like computers and video cassette recorders. The agreement expires this July 1, and the Bush Administration thus soon must decide whether to renew it. Doing so would make Washington a hypocrite in its free trade efforts to open markets abroad for American products. The 1986 chip agreement, after all, restricts trade, ostensibly to help some American segments of the semiconductor industry. The agreement in fact has harmed American computer manufacturers, who have found themselves paying higher prices for computer chips. This makes American computer manufacturers less competitive and drives up computer prices for all Americans.” [by Bryan Johnson, published January 24, 1991 – 20 min read]
!! @ “high-tech consumer electronics equipment like […] video cassette recorders”
It would be an interesting couple of evening's research to compare and contrast the competitive rise of Japan in the 80's and the rise of China in the 10's and how the US reacted to both and how both reacted back.
The trade war with Japan in the 80's really helped Samsung jumpstart their DRAM business -- South Korean companies, Samsung and SK Hynix, account for 80% of global DRAM production today.
> global trade ... everyone is lifted up and made richer over time
Are you sure about that? "Total global trade" seems unstable to me. Look at the coronavirus, and countries mostly unable to produce their own masks, having to import instead from far away countries — but that country sold to the highest bidder primarily. Here were I live, I couldn't buy any masks (back in April and May).
> the cost of attempting to be self sufficient in everything (like semiconductor manufacturing) means closing borders to competitors outside
Can that be done differently? A country can have a small amount of domestic production, to keep knowledge and tech available in the country. Whilst importing most things from abroad, because of the benefits you mention with global trade. — Then you get both stability in case of crisis, and global trade efficiency? And more local jobs
In regard to the masks, examples exist and the world isn't perfect. No doubt it will be a business school case study for decades to come.
As far as personal anecdotes (because seeing numbers and seeing it with your own eyes are not the same), I have been traveling for more than three decades to developing countries and have seen the changes, the access to medicine, clothing, school supplies, food availability. From the developed world, we would still call these people poor, but the quality of life for the same class of people over a few decades has changed dramatically.
> Can that be done differently? A country can have a small amount of domestic production, to keep knowledge and tech available in the country. Whilst importing most things from abroad, because of the benefits you mention with global trade. — Then you get both stability in case of crisis, and global trade efficiency? And more local jobs
Just run through the thought experiment. It can be done, but that small amount of domestic production needs to find either subsidy or a customer that must have things made domestically (like maybe a government). Subsidy means the taxes you and I are paid are allocated to create sub-efficient industry. Domestic production needs, while real for purposes of national security etc, are tricky. We have seen in recent years Trump (his predecessor too), using executive power to force things to happen on the basis of national security. Some are fine with it, other call it abuse of power. My point is just, it is messy.
> Obviously there are other consequences, such as job migration
This is an interesting issue. The existence of national borders and the restriction on the free movement of people reduces the efficiencies achieved with specialization. Imagine how more efficient it'd be if Taiwan had easy access to US semiconductor talent. Similarly, it'd be more efficient if the seasonal migrations that help agriculture didn't happen and those people actually lived near the crops they help maintain.
>Similarly, it'd be more efficient if the seasonal migrations that help agriculture didn't happen and those people actually lived near the crops they help maintain.
I mean it's more complicated than that, most seasonal migrations of agriculture workers happen in large part because the seasonal workers come from areas with lower standards of living and lower cost of living. Partially, they are attractive as workers because they are able to take lower wages than the people who live where the crops are grown.
The act of extracting that labor more efficiently levels the gradients, though, which self-limits the problem.
When I first started my career in software in 2000, you could hire 6 Chinese engineers for the price of one American engineer, or even 2 for the price of an American high-school student. Nowadays, the good software engineers in China (the ones who work for Google etc.) get paid just as much as their American counterparts. Similarly, the good American engineers have largely maintained or improved their salary - hell, L7 compensation at Google (and the equivalent at Facebook/Snapchat/Apple/Lyft/etc.) is ~4x the highest compensation I remember seeing 15 years ago. Wages for mediocre software engineers (say those whose only skill is building PHP webapps by copying code from StackOverflow) have marginally improved in China and have fallen significantly in the U.S. We replaced a geographic wealth gradient with a skill-based one, which IMHO is significantly more fair but probably doesn't feel like it if you were on the losing side of the gradient.
> The act of extracting that labor more efficiently levels the gradients, though, which self-limits the problem.
Not necessarily, or indentured servitude would have been impossible.
> Nowadays, the good software engineers in China (the ones who work for Google etc.) get paid just as much as their American counterparts
This seems to be more of a result of the low friction of hiring a good remote developer. It's also not completely true - a top developer in Berlin or Dublin (which is where I live) makes less than the same developer would in the valley (I know that because I was offered to move) and a lot more than a developer makes in Brazil (where I'm from). I am not aware of any remote developer who gets paid what they'd be if they were living in London or San Francisco.
> the good software engineers in China (the ones who work for Google etc.) get paid just as much as their American counterparts
That's not true. I can provide a data point: a Googler who works in Beijing, 3 years into his career with 2 years at Google[1], get paid roughly 72k USD per year. I don't think this is even comparable to the compensation level in Valley. That said, if you compare with the Japan or Europe (except Switzerland) counterpart, it does seem to be on the same level, so the outlier here is US.
[1] To be fair this does not matter because he is stuck at L3 due to works nullified by internal protests.
In general the reason for migration as a lifestyle instead of being sedetary is because they can't stay in place. The "jet-set" or even "RV lifestyle" are deep anomalies of those who don't have that concern.
If there was a year round harvest they wouldn't be migrant workers. It brings to mind a "silly stopgap" solution mix of paying people in low wage countries to operate farming drones to subsitute for the AI in spite of the cost of building the body being higher and the infastructure and tools required to control a bot not corresponding with migrant farm worker origins.
> Specialization is a feature of global trade. Regions focus on specific industries to gain expertise and increase efficiency.
This is very comforting to regions that are specialized in high-cost, high-margin, high-technology products, and not very comforting to regions that specialize in low-cost, low-margin, low-technology products. The countries growing the bananas that go into your smoothies have specialized in growing bananas, but they aren't making any money from it.
They technically gain some with the niche over other options but certainly not the lion's share as they are very commoditized and not the bottleneck of scarcity at all. Shippers and retailers make more and it is far more expensive for them to get into it than to run their own local banana farm. Credit is also less accessible.
Low capital banana growers would do far worse if they tried to compete by growing grain crops in the region as they have to contend with high capital mechanized and chemical using operations with massively better yield and closer markets.
Specialization is at least a local maximia to them even if there are other options better in the long term. Take say West Virgina's coal mining vs a more diversified industry.
That’s a great point, but I don’t think theory says that you have to stay at the base level of your specialization. While not as high margin as the other industries, they could go up the value chain and start producing smoothie packets to make more money.
If they made great smoothies (in addition to growing bananas), then they wouldn’t be leaving that market to blond Californian influencers living in Bali.
Well, some of them tried to diversify but the country of the blond Californian sent tanks and the CIA to make sure that the correct parties get their slice and keep everyone else down.
This happened for bananas going into the smoothies, rubber going into tires (at the time), coffee going into lattés, oil going into tires (at a later time), etc
The world isn’t quite that rosy which is why Trump won elections. Free trade will often boost the most affluent at the expense of the working class.
With free trade you put more workers in competition with each other pushing down salaries while capitalists can move their investment to a wider variety of places to get increased return.
Even for poor countries it is not always a good thing. China before WWII got screwed over by western capitalists owning all the industry. That is why they have the required local partners now.
I am not saying free trade is inherently bad. Just that you can have too much of a good thing. I think we are way past that in the current world and should be scaling back, not ramping up.
Yep, generally agree. Might disagree on what's too much and what not, but your point that free trade (and almost anything in life) taken to the limit will have dire consequences in other places is important. Free trade is a framework.
I find a lot of people in the US are quick to point out the problems with free trade, but tend not to look at examples of places that took strong protectionist positions and how that played out over the span of decades. Point being, there are examples to be made for either argument being taken towards a limit.
This all works fine right up until China invades Taiwan.
As we've seen with Brexit and Trump, nationalism trumps economics. America is having a hard time tolerating a growing China, and frankly, China is worth opposing. It had been hoped their growing middle classes would lead to demand for a more liberal government, but that hasn't happened, and instead the CCP sees Western liberal ideas as a kind of alien mind virus which must be extirpated. Another cold war with local hotspots looks almost inevitable.
It'll be interesting to see how this evolves over time.
Nationalism in its modern (post-1865) form is a product of technology + economics. The U.S. before 1865 was a relatively lose confederation of states: this is enshrined in the 10th amendment (now largely forgotten, but which reserved all powers not explicitly delegated to the federal government or people "to the states"), and indeed in the word "state". Same thing in other nations like Germany and Italy: before 1871 these were independent states like Prussia, Bavaria, Saxony, Hanover, Brandenburg, Westfalen, Bohemia, Sardinia, Tuscany, Venetia, Florence, etc.
The driver for national unification was largely industrialization. New technologies like the railroad, telegraph, steel-making, mass production, etc. gave large advantages (particularly on the battlefield) to larger political unions that could draw on the labor of many regions and specialize. Political bodies that didn't adopt these technologies got rolled. The North likes to view the American Civil War in terms of slavery, and the South likes to view it in terms of states rights, but fundamentally it was a clash between the industrial system in the North vs. the plantation system in the South. And just like Brexit and Trump are doing now, the South fought viciously to preserve their self-determination and way of life, but the industrial system was just more efficient.
Right now, we're seeing protectionist lip-service. My iPhone is still made all over the world, my employer still makes a majority of its money in foreign countries, I still have to compete with foreign buyers when buying a home (though it's better now than it was in 2015-2018). It'll be interesting to see what happens if there's a serious threat to that. We had a previous era of globalization in 1900-1914 that ended with WW1 - but arguably that was because the world wasn't ready for it, and globalization was entwined in the lives of the rich but not the common people. Now there's a significant number of people who are largely unaware of how dependent their lifestyles are on globalization, and I'm curious what'll happen if it's actually threatened.
> The North likes to view the American Civil War in terms of slavery, and the South likes to view it in terms of states rights
Minor nitpick, but the Confederacy viewed slavery as the cornerstone of their government[1]. Those who now claim the Civil War was about 'states rights' are engaging in simple, brazen revisionism.
> In what’s now known as the “Cornerstone Speech,” Stephens told a Savannah, Ga., crowd in 1861 that “our new government is founded upon exactly the opposite ideas [as those of slavery foes]; its foundations are laid, its cornerstone rests, upon the great truth that the negro is not equal to the white man; that slavery, subordination to the superior race, is his natural and normal condition. This, our new government, is the first, in the history of the world, based upon this great physical, philosophical, and moral truth.”
Beautiful observation, I for long claimed, and been looked upon like a madman too for that, that the universal access to communication will for the first time allow for creation of a "supranational" state, and obsoletion of nation states.
Take a good look. Back in 2012, people were genuinely thinking that Zuckerberg was going to run for the election. And they rightly though that if facebook was for example post "Go Vote Zuck" on the frontpage, he might've well won.
This was a very fascinating read and elegantly generalizes some truths that I've been only vaguely aware of. History and warfare is more often in effect a brutal and bloody competition between societies' efficiency.
This has implications for how the future could look that go far beyond what seems most "reasonable", what looks most like the past and what will make each individual person feel best. It doesn't necessarily have to be war - it could also happen through peaceful but intense competition and trade.
The flaw with this whole line of thinking is that it treats workers and jobs as interchangeable. A 40 year old, low intelligence factory worker is not going to become a software engineer.
And even if you take the rewards of comparative advantage and redistribute them to account for this, you are still destroying the social fabric of families and communities. Vitality, self-respect, and good values come from being engaged in productive work.
My bank account tells a different story. Only very few people got richer. General purchasing power fell off like cliff in the US after the 70s when all the outsourcing happened. There is nothing positive about globalization. The bad effects are somewhat mitigated by a massive amount of technological progress.
> closing borders to competitors outside eventually leads to inferior product.
There is no proof for that. With close borders you can simply steal the intellectual property of your competitor and match the quality within a year. The Chinese are doing this for decades.
> In general though, everyone is lifted up and made richer over time
This is quantifiable wrong. Maybe you have to get out of your filter bubble. If anything globalization leads to more inequality. The statistics about how the top 1% make all the money whereas everybody else loses are neither controversial nor new.
Would this be a US-centric view/"filter bubble", specific to American-specific business regulation/deregulation, tax codes, and outsourcing strategies?
In Asian countries, i.e. Taiwan, China, SK, Japan, Vietnam, as well as, say Mexico after NAFTA/NAFTA 2.0, what are the numbers regarding general purchasing power?
I think it's inarguable that globalisation has put downward pressure on wages in a lot of industries. It's also made cheap products widely available to people who could never have afforded them before, and raised hundreds of millions of people out of poverty.
On the other hand wages in China have shot up and the huge pool of cheap rural labour is mostly tapped out. Low end manufacturing is moving to other countries, Samsung now does most of their smartphone final assembly in Vietnam but those countries are smaller. That trend is playing out it's end game. Employment in the US and Europe was rising, and came close to 100% before the Pandemic.
So I actually agree with your criticism, but not that there's nothing positive about it. Things change, overall I think things are changing for the better but that's never a painless process. That's why although I'm a believing market capitalist, I also support social programs and universal health care. If corporations deserve bailouts, so do ordinary citizens. We're all in it together.
> On the other hand wages in China have shot up and the huge pool of cheap rural labour is mostly tapped out.
I would have no problem with that if it didn't happen at the cost of American worker which it clearly did.
> Employment in the US and Europe was rising, and came close to 100% before the Pandemic.
You can thank the "nationalistic" trade policies of Trumps USA towards China for that. In Europe on the other hand (which had no such policies) unemployment especially in the periphery was and is still sky high and the situation was looking pretty grim also before the pandemic.
Here in the UK unemployment was rock bottom before the Pandemic, we only had a couple of hundred thousand people who had been unemployed for more than a year.
As for globalisation, the US became the dominant global economy how exactly? Protectionism, aside from being an autocratic intrusion into the freedoms of citizens, just doesn't work.
Take the US steel industry, a main target of Trump protectionism. Yes blast furnace employment is marginally up, but steel mill employment has been hammered because it largely depends on working imported steel. The domestic furnaces can't expand fast enough to meet supply, and don't produce some of the steels needed by manufacturing anyway. As a result manufacturers consuming steel are facing inflated prices and reduced competitiveness. It's unintended consequences all over the place.
Don't trust employment statistics you didn't fake yourself. I don't know how it is in the US, but here in Germany a lot of effort is put into making unemployment seem smaller than it actually is.
The US still blames the victim for their own unemployment.
We have a long way to go before the US system feels like a a kindly helping grandfather rather than an abusive angry father that blames you for not working harder.
The Chinese masses are much better off today than they were in the 70s.
Globalization does increase inequality, particularly in countries with a lot of capital, but it also makes the very poor better off. What the US calls the middle classes do stagnate, though, and capitalists are the biggest winners - which, don't forget, also includes pension funds as a significant fraction.
Most of the top 1% are wage slaves like everyone else. The top 1% by income isn't what's interesting; it's the top 1% by assets. Wealth inequality is much bigger than income inequality.
But china is pretty nationalistic. They allow other global companies to produce within their borders, sure. But if you try to export something from another country to china you are going to have a bad time.
So the reason why Chinese masses are so much better off today is this very "one-sided" version of globalism. You might as well call it nationalism.
Plenty of people have gotten rich exporting goods to China. They just tend to be concentrated in relatively low income countries like Vietnam, exporting things like clothing and textiles. China actually likes this, because it frees resources to develop strategic industries with higher wages.
Still China controls the borders very well and allows only products to enter when it serves the interest of China. This is the definition of nationalism and one of the reasons why the quality of life in China is rising so fast.
I am not clear, what specifically does china limit imports of? You can sell cars, phones, just about anything i can think of, even loteral plastic waste is allowed, obly recently standards were tightened.
Moreover, even from the West, tons of cultural products are exported to China. That's what gives Beijing the implicit power to censor the NBA, video game companies, Hollywood, etc.
companies headquartered in Santa Clara Valley that care about fabs:
Intel, AMD, Nvidia, Lam Research, Applied Materials, KLA, GlobalFoundries, Broadcom, Apple, Xilinx, Maxim Integrated (now part of Analog Devices), Linear Technology (now part of Analog Devices), Marvell, Cisco, Cypress, Google, Cadence, Synopsys, Western Digital, Seagate.
I have to wonder - how much of the fabs going to Taiwan, Shanghai, SK are due to
1) government support - i.e. the national government saying "we want this sector to succeed" and providing funding via grants/loans/subsidies, (or by fiat w/r to PRC)
2) actual labor costs?
3) talent, i.e. American-trained Chinese/Taiwan/Korean talent coming home, then generation 2.0 starting up research at Chineses/Taiwan/korean universities?
Assuming a long-term visionary US government wanted to compete; would we have to fund fab research, development, and capital i.e. similar to the pentagon funding Newport News shipyard to keep strategic know-how alive in the US market?
Probably all of the above. The founder of TSMC was educated at Harvard/MIT/Stanford, and spent the first 25 years of his career working for Texas Instruments in Silicon Valley. He founded TSMC because the Taiwanese government gave him a large grant to found a nonprofit research institute in Taiwan. He was looking at the competitive landscape and realized that the one way Taiwan could capitalize on its biggest advantage (low labor costs of fairly educated labor, at the time) was to do only manufacturing and outsource the design, IP, and marketing to other countries that were better at it.
1) gov't support: TSMC's had plenty of gov't support from the getgo and my understanding is that the govt still has some financial stake in TSMC -- which would be a red flag in the US. Samsung has a big $15B fab in Austin, TX aka, FTZ foreign-trade zone, where Apple's A chips were made until the early 2010's, but after Apple moved to TSMC in Taiwan in 2012-13, it stopped investing in smaller nodes -- now, it's mainly producing memory products (and Tesla's FSD chips). All their latest nodes (< 14nm) are in South Korea.
2) labor cost: probably very insignificant. While they employ high-paying high-tech workers, it's a capital-intensive, not labor-intensive, business. Both TSMC and Samsung spend over $10+B annually on CAPEX.
3) brain drain?: Morris Chang worked for TI for decades before founding TSMC. He pretty much started the outsourcing business in the late 80 single-handedly.
Sure. I don't agree with Trump on a lot of things, but he's at least doing something to bring them back.
If a substantial fraction of the semiconductor industry (IDM + fabless + fab suppliers) is in Silicon Valley, then the name still makes sense even if there is a lot of other money floating around the area.
also, why would this make sense:
> of course, excepting Apple
Apple is probably the single largest customer of TSMC, and their products depend on their semiconductor design team (especially true now that they are moving to in-house CPUs for laptop/desktop). Why throw them out from a discussion of companies that care about fabs?
If one asked the question of which location in the US the semiconductor industry has the highest footprint in, the answer would definitely be the Bay Area (maybe California, to include San Diego, etc).
But if you ask the question of which sectors the Bay Area has the largest investment and footprint in, then semiconductors would (unfortunately) be only a small part of that. That uncomfortable truth (which is exactly what I'm trying to point out in the above comment) is that market valuations today seem to be driven by the things built on top (in particular, the "data economy" and the effectiveness of personalization-driven consumption increases), rather than (for eg.) the semiconductor engg which is crucial to build those platforms.
An analogue of this is when the Ford CEO speculated in 2018 to the effect that it might be more profitable to sell customer data derived by selling cars, than from selling cars in the first place.
Because it isn’t clear if it matters that much at all. You are using devices with larger transistors than what TSMC is shipping right now. If it was a 14nm Intel chip in your iPhone it wouldn’t matter that much, your phone was shipping 14nm chips a few years ago and you still bought one. People are still using those 3 year old phones and by all indications the old phone use trend is accelerating.
However it is utterly inconceivable that anyone would “go back” to using some old social media platform.
E-Mail, IRC, forum software, mailing lists aren't at all comparable to Facebook. They do very different things.
I was really talking about, for example, Vine. You'd rather use TikTok than Vine. There might not actually be any social networks from late 2016 no one uses today that I've heard of, so it's hard to give an example that looks back to when 14nm was the typical node size for phones. Which is sort of my point, it is in some strict sense of the word literally inconceivable to go back. Whereas I remember what an iPhone 7 was like, and it's not that big of a change.
TSMC is the center of the universe for chip fab. AMD, NVidia, Qualcomm, and Apple all rely on their manufacturing. Doesn't this create a systemic risk especially with Taiwan's ties to China?
TSMC just stopped making chips for one of its biggest customers just because the U.S. passed a law. They're building a big facility in Arizona just to satisfy the economic nationalists in the U.S. Plus, Samsung is also outside of China, and while their technology is behind TSMC, they are fairly competitive. I don't think any ties Taiwan has with China are very worrying in this case.
TSMC's ties with the U.S. are, on the other hand, a big strategic threat to China, and maybe to other countries that aren't the U.S.
Samsung has just as many ties with the US as TSMC. Both companies use semiconductor manufacturing equipment from US firms like Applied Materials and KLA. The reinterpretation of US export controls that bars TSMC from selling to Huawei extends from not just barring companies from selling products to China with US technology inside, but also barring companies from using US technology to manufacture Chinese-designed products that are then sold to China. This applies to Samsung just as much as TSMC.
TSMC isn't real bottleneck here. It's US semiconductor manufacturing equipment firms fully under US jurisdiction that underpin the supply chain for any modern fab.
this area of industry is perhaps the most interesting- the firms doing research and at the forefront of chipmanufacture, but in the lay tech press doesn't get a lot of fanfare. Are there good links to write-ups about how this industry is structured, etc? The only other company I know about is ASML who makes the EUV lithography machines...
I'd say that the ties of Taiwan with China are not that concerning, considering that they actually consider themselves to be the legitimate government of China in exile on the island of Taiwan and that the mainland has missile batteries ready to fire missles on them.
I guess the real danger here in our unforeseeable world will arise if the American government becomes either unwilling or unable to defend Taiwan from a sea invasion from the CPC, something that would probably be more serious to American (and world) security than losing a few fabs in Asia, I think.
Do you think the American government is able to defend Taiwan right now?
With China about 100 miles from Taiwan, I don't see how anyone could get close without mass casualties. China has the shorter and more secure supply lines. They could send an invasion force using numerous small water vessels in waters they could easily defend. In the end, the losing side would just destroy all the important places in Taiwan.
Would China actually bother with that? I don't think so. They like doing business with the Americans, and that would basically be a declaration of war to the USA. Even if it didn't boil down to that, sanctions would hurt them plenty, much more than they want. After all, Taiwan wasn't not for a split second part of Communist China, so what's the point of risking anything for an overcrowded island as long as no one recognizes them as independent?
So yes, I think the conflict will definitely remain frozen for the next decades, and it will be at least until either the CPC loses control of the mainland, the USA lose their grip on the region, or some US politician goes bananas and pushes for Taiwanese independence.
Technically, they do, they are forced to remain the Republic of China (and also lay a claim on Mongolia) because any change of status would be interpreted by The PRC as a declaration of independence. So yes, while it's quite clear they don't care about the mainland, they have to de jure still keep the irredentist clauses in their laws and statutes in order to avoid war with the Chinese.
> TSMC is the center of the universe for chip fab. AMD, NVidia, Qualcomm, and Apple all rely on their manufacturing. Doesn't this create a systemic risk especially with Taiwan's ties to China?
It does, and that's not only TSMC, or even fabs as such.
Taiwan is a source for a many single vendor semiconductor manufacturing equipment, and consumables. Taiwan going down means the semiconductor industry as such, globally, going down for a few years at least.
First thing that comes to mind are lithography machines, but for the very high-end ASML is the only game in town currently afaik. And they are sitting in the Netherlands (working with Zeiss in Germany). For larger feature sizes there are vendors too.
Equipment, some low profile stuff like coaters, wafer preparation, and cleaning. Packaging equipment, and consumables. Some AMHS. Gas, and chemical handling equipment. Some resist makers.
Clean room material markers, few makers of vacuum grade plastics, FOUP, film, and other carriers.
All GloFO, Sam, and Japanese all use at least in some part something from Taiwanese makers. If for example, the only one maker of particular brand of proprietary resist stripper does go down, I don't know if somebody would even be able to reverse engineer it to know how it works, let alone reproduce it.
They will have to go back few generations in the resist tech to resume production with non TW suppliers.
And like that with many, many other parts of the ecosystem. It's only a tip of the iceberg.
Just curious, what would you have liked to see the U.S. do about Hong Kong? Arguably if anyone was gonna do something it should probably be the British being their agreement was broken. I'm sure the British would have U.S. backing them if they wanted to retaliate.
The U.S. started removing the extra trade agreements from Hong Kong (which arguably is a large part of what made Hong Kong what it is today) and sanctioned individuals in the Chinese government [1]. While this seems to be a "weak" response, I'm not sure what else I would like to see short of getting the military involved.
Given that agreement on Hong Kong independance was set to expire relatively soon, is difficult to justify serious intervention from a cost/ benefit perspective.
The original seisure of Hong Kong was an act of gunboat displomacy, and not exactly an exemplar of justice and law. Consider how its seen in donestic politics in China.
This does not mean that I approve of China's activity, just putting things in perspective.
>if anyone was gonna do something it should probably be the British
Except the UK has much bigger issues ATM like dealing with the social, political and economical fallout of Brexit and Covid-19.
To put it mildly, even if they wanted to, it's tough for them to help put out a fire in a far away village when they have a huge dumpster fire in their own back yard to deal with first.
Building relationships with our allies in the area (TPP), State Department diplomacy, etc. to pressure China effectively. I think TPP was dead regardless of who won, but that State is impaired right now.
It is hard to see what the US should do, but I think the west has a moral obligation to do something (even though it is technically an Anglo-sino agreement).
The UK is trying to welcome people from Hong Kong to the UK (passports left over from before the handover) which could hurt them where it actually matters if lucky.
The 'government' is not an independent actor - its soft power. And its especially soft in US. This whole thing with 'executive power', look at me I am doing things - its all smoke and mirrors.
Obama promised to end wars close down Guantanamo bay and in the ended up keeping up all war campaigns and on top of that he started droning people around the world.
The 'big boys' of the industry have enough fingers in the pie(s) to have their say in things that would affect them.
And independence of Taiwan is definitely one.
> Hong Kong fell without a peep from the U.S.
Because it was mostly Chinese businessmen window to the world, is fall of independent HK really that big of a deal for US or UK?
HK isn't a sovereign nation, Taiwan is. Also, having the US go in would be questionable. Wasn't the "one country, two systems" treaty an agreement between uk and china?
I mean, you can make the same argument with "the earth is flat... depends on who you ask". At least when it comes to the Taiwan (the island) I don't think there's any doubt that the ROC government has a monopoly on violence there. They also have their own military, police force, and collect their own taxes, independent of the PRC.
Best I can recall, it was formed by Nationalists, partly Nazy government that had to flee after like a third Communist uprising when they relised there were more revolting peasants than they had bullets.
Obvious a lot of time has passed, but it's not quite flat earth. It just requires a sence of 'historical justice', however unhelpfull
It's a little bit more complicated than "ask Taiwanese", depends on whether you ask the indigenous people or those coming from mainland ~1949 and their descendants, you may get different answers.
I don't think you mean Native Taiwanese (as in Native Americans) here, so I have to say people are not unanimous about whether "Taiwan" is a sovereign nation.
Except completely reclassifying it to remove the thing that made China want to seize control in the first place: special trade status.
Other than that, what could the current administration do that wasn't screwed up by its predecessors?
My allusion to incompetent government in the U.S. should not be construed as limited to the current administration. The U.S. government has been screwing up a lot of things for a very long time now.
Yes, with many thanks to the Republican party that doesn't believe in governing competently. The party of anti-government has been doing everything it can for decades to get the government to break down and screw up. Instead of improving government, they've been systematically destroying its ability to deal with real problems.
> you guys understand that Hong Kong has and always been part of China, correct? UK gave back a land that wasn't their to keep.
PRC signed an agreement with the UK that set out the legal parameters for this transfer of sovereignty, and PRC is contradicting that agreement with their actions. While it may not legally be the UK's to keep, it was not China's to take in this respect either.
> What can any Western country or US president can do? Do you declare a war with a country over a piece of land that is rightfully their?
Well, in the mean time, the U.S. has terminated the special status of Hong Kong which allowed it to serve as the conduit between the civilized world and a country with essentially no rules that regularly outweigh pure class/political privilege.
The English legal system and liberal order that the UK imposed on Hong Kong was in large part what made them so dazzlingly wealthy and dynamic; and if PRC wants to corrupt that, the result is that the benefits of the system they are corrupting disappear with that system.
Also, it is not always right to honour the law, when dealing with bandits. The CCP does not care for the law, so their assertion of a legal right to Hong Kong (which has not matured anyway) is hypocritical, and can essentially be ignored at no moral hazard.
Furthermore, even if we asserted that the CCP has some agreed legal right to Hong Kong that will mature in some years, I would not agree that it has a moral right to take its people as property.
A true leader would have gotten on the phone with all of his counterparts in all of our allied countries and given notice to China that the new laws to curtail freedoms are a red line. And come up together with a list of collective sanctions (including banking) to threaten China with.
Instead, Trump has spent so much of his time kissing up to Xi to get his help to win the re-election (per Bolton's book). And check out some tweets from 2020:
"Terrific working with President Xi, a man who truly loves his country."
"In particular, on behalf of the American People, I want to thank President Xi!”
"“Just had a long and very good conversation by phone with President Xi of China. He is strong, sharp and powerfully focused on leading the counterattack on the Coronavirus."
"Of his many tweets over the three-day Memorial Day weekend, when the Hong Kong issue was at the top of the news, none was about Hong Kong. During the Hong Kong protests of 2014, Mr. Trump tweeted one of his few clear statements on the plight of the territory: “President Obama should stay out of the Hong Kong protests, we have enough problems in our own country!”"
https://www.nytimes.com/2020/05/27/opinion/china-hong-kong-l...
> A true leader would have gotten on the phone with all of his counterparts in all of our allied countries and given notice to China that the new laws to curtail freedoms are a red line. And come up together with a list of collective sanctions (including banking) to threaten China with
This is literally, exactly what the White House did.
Can you please point me to an article where Trump called the leaders of all our allies to create a coalition? And also which collective sanctions were created?
The UK and Australia are willing to flap their mouths a bit [1] over it at least, and the UK is much closer to actual sanctions (Australia has, for the time being, not terminated their special trade arrangements with Hong Kong).
Ultimately only the U.S. has taken any leadership on this matter, even if I think it will be inadequate. There is more to be done; but with the U.S. Presidential election looming, one thing that would steel the resolve and buff the resources of PRC assets in American politics would be a major announcement.
Nothing is as simple as the free world bullying the nominally-free world to condemn the only major state in the world conducting a holocaust; because apparently those "allies" don't give a toss.
I think you might be over estimating how long things were shut down in Asia. Outside of Hubei, China had an extended Chinese New Year for a couple weeks (in February) and a longer post holiday ramp up. Taiwan, South Korea and Japan didn't shut down.
Pretty much any company that imports stuff from China would have already had additional supplies built up to cover the normal CNY shut down and ramp up so the supply chain issues were lower than if COVID had shut down China at a different time of the year.
TSMC has fabs in Washington and they are going to open another one in Arizona. They also have a bunch of design centers in the US, so no. The strategic planners have thought of all of these things way ahead of you.
Even with that, the global supply chain in semiconductor consumables will go down for a few years. With all respects, its not humanly possible to operate such a "born global" industry as semiconductors manufacturing without a globally integrated supply chain.
Russia for example still keep tries to have a 100% internal military semiconductor supply chain. Their best chips made on a domestic process are 10μm. TI military foundry is not much further ahead.
I doubt that any actual "strategic planner" actually put his hand on any American policy making process in the last 30 years. The way how terribly unprepared the US was to even such an insignificant nationwide emergency like the virus, is the best proof.
With all due respect, the US Gov doesn't have to depend on TI for defense/national security chips. They could cut a deal with Intel as soon as the ink is dry on the security clearances.
In principle, in case of extreme urgency on a level of national emergency, they can, but this will also mean that it will be Intel who will have to redesign, and adapt the mask. Some military IP is so old, that it isn't even digitised, or is a non-syntheszed, hand drawn IP. Some of it will likely be completely unworkable on a new CMOS process because of dependency on some, now exotic, high speed CML logic.
And we are only talking about digital chips. Analog chips case will likely be hopeless without a specialty analog foundry.
In the peacetime, it is very, very unlikely they will be able to "reorient" to make defence chips, as it will seriously disrupt the company.
And in the end, it may not matter at all if the supply chain for materials will go down in case of a military conflict.
Now imagine Chine acquiring outdated, but still somewhat decent fab capability to sustain itself in a pickle .. and then rolling over Taiwan. Wouldnt have to be in the open, a big 'oopsie all TSMC fabs burned down overnight' would create chaos for not prepared nations.
The important machines from TSMC are made by other companies. Competitors can and will also make 5nm chips. TSMC definitely has a headstart and it requires a huge investment to realize a fab (machines, clean rooms) also a lot of integration work and many optimisations to become profitable.
> It seems to be that than TSMC needs to increase their prices. They should be extracting more margin when compared to AMD, NVDA etc. They are just killing it. One of the main reasons with intc had better chips was they had the best Fabs.
TSMC margin was always at around 30%, they are killing it.
But if you are the only company in the world that can produce chips good enough for iPhone CPU's, you could have 600% margins and Apple would still buy from you rather than let someone else take the crown of fastest smartphone...
Or they realize that at any point they have low-N years before Samsung, GloFo, etc. could catch up with investments from AMD, Nvidia, Apple, etc. so it behooves them not to gouge to the point that those investments make financial sense for those companies. TSMC might just be a couple billion dollar investments away from becoming a commodity again.
I wouldn't count on GloFo being a leader in process tech. August of 2018 they announced they suspended work on their 7nm, 5nm and 3nm processes. It looks like they're focusing more on being a follower. This has also forced AMD to compete with Apple and others for the best 7nm that TSMC can offer. Intel is lucky that AMD can't meet demand.
GloFo is sinking because TSMC aggressively courted AMD. In an alternate universe where TSMC was content to sit back and extract margin, GloFo would still be in the running.
Even if TSMC decided tomorrow to sit back and extract margin, GloFo could still probably get back in the game. That ability decays with time, of course, and that decay is what TSMC buys with their low margins. They are suffocating their competition to build a moat. It's a much better strategy than "extract margin and make big bets on fancy new tech to stay one node ahead," with Intel as Exhibit A.
GloFo has historically been unprofitable and their investors were unhappy with the idea that, just as they had finally reached profitability, they now needed to either
A) spend tens of billions of dollars on a new fab facility
B) shut down production in one of the existing facilities while spending billions of dollars to upgrade it to 7nm
While not having the volume to be able to court the largest customers who are the most interested in 7nm.
They decided to stick with their existing 14nm infrastructure and specialize in the long tail of smaller customers who want custom chips and don't need a leading-edge node.
The slowing of Moore's law means that they have the option to wait and see, bank up capital, and then jump back in when everyone else has done the hard work for them of figuring out EUV.
Nobody in the semiconductor industry will put up with anyone in the supply chain making a 600% margin.
Large Nvidia chips might not be able to move quickly, but all of the MCU, WiFi, etc chips would migrate to cheaper fabs like SMIC. Which reduces TSMC's revenue, which reduces their ability to invest in new processes. Cents (and even fractions of cents) matter to those chips.
If money's all that's needed to build a fab to match TSMC's 5 nm without prior experience then their biggest competitor would be China's SMIC. They have unlimited funding from the Chinese government because an embargo hurts China's electronics industry a lot more than just price gouging. SMIC, a company with unlimited funding to poach TSMC engineers and actual experience with chip fabrication is still 2 gens behind. Apple's not going to do any better.
Apple's breakthrough came years after acquiring PA semi and Intrinsity -- and neither required $10B in annual CAPEX to maintain their lead in chip design.
TSMC is already a major Apple partner, Apple had no reason to start a talent war here. Remember, Apple squeezes suppliers and labor (wage fixing from the Steve Jobs days).
They only build their own stuff when they see a competitive advantage to doing so — when IBM stopped delivering on chip efficiency or when Intel’s chips started stagnating.
TSMC is known to be very selective with cadres. People who are given "keys to the kingdom" are selected among all things upon loyalty. Take a look on their number of GMs, and VPs with 10+ years of work at TSMC. At the highest levels, TSMC kind of stops being a company, and starts looking like a fraternity.
There are other fabs in the world outside of Taiwan. It would be within the realm of possibility that Apple could purchase a company with good but not great fab capabilities and improve output with strategic hiring.
Higher extraction margin also means it is more worth DYI which creates another competitor long term. It is sort of an auction for the leading one. "Only one able to produce them at the same cost/with this delay." Change the cost and others may run their numbers and decide. "Get our rivals and backers on the phone and see if they are willing to fund a shared fab - together we can probably reduce our expenses fifty percent long term but we can't afford it on our own."
Apple is paying better margins than that. Apple funds R&D of new processes for TSMC. If you put a 600% markup on that, apple might just go build their own fab and put you out of business.
> and Apple would still buy from you rather than let someone else take the crown of fastest smartphone...
... and invest in making their own chips from end to end in a couple of years. Apple has proven that they do not hesitate to completely take over stuff with the recent Intel-ARM switch when the quality or price does not match what they perceive to be fair.
TSMC is in an extremely powerful but also very precarious position - they are worth ~400B $ in market cap, and Apple has ~200B $ in cash reserves and a market cap of 2T $. If Apple wants they can either buy up TSMC whole or they can set up a competitor.
no they cant. The taiwanese government wouldnt let them buy it. also they cant set up a competitor because the kind of people that can pull this off is limited and they all work for TSMC. The prc government tried this for decades and they have infinite money. there is a good book about it called "hidden dragons paper tigers". Apple is not god :-)
Apple is not god, but Apple is, more importantly, not the PRC. It would be significantly easier to lure top engineers to America, pay them multiples of what they currently earn and work for a prestigious company. The PRC has only one of the main motivating components.
have you ever been to Taiwan? I think moving to America from Taiwan is not a perk. Its the opposite of that. Also you can debate if TSMC or Apple is more prestigious.
For geopolitical reasons, TSMC is not for sale. And as for setting up a competitor, China has been trying for more than a decade, spending a lot more money than Apple ever will, and they are still not close.
TSMC is like Taiwan's Aramco in that it's economic entanglements are the country's primary protection/leverage against regional neighbors. Profit is important but it's also about stability and survival.
MicroE is the sub-specialty that deals with IC production. EE has its own problems but there is far more opportunity than working in the shrinking number of fabs.
Most electronic design work is done outside of the US so the opportunities are still limited. You can become trapped in a job or unemployable if you have specialized in something that isn't in demand. Most regions have few concentrations of employers that you can shift between so changing jobs usually means moving. The economic realities of making things and the limited labor competition suppresses salaries.
Large volume manufacturing deals are negotiated sometimes years before, TSMC had no idea how much demand there was or how badly Intel fails when AMD, NVDA and Apple bought the capacity.
Keep in mind that TSMC also gains a position where they are the only superpower in fabs. They can duplicate the N5 fab and sell at any price they want. Apple pays R&D. Imagine a world where someone up-front pays your R&D, pre-pays batches at a profit for you, and lets you sell to anyone else while making you the best in the world. They gain basically more than Apple does from this.
Considering that Apple buys a lot of different chips from TSMC of radically different areas, that might be a questionable metric. They might average out to $10 a chip if you consider the chips in airpods and the application processors equally as each one chip. What'd be more interesting would be cost per square mm of silicon.
There's an essential link between freedom, creativity, and innovation. Is it any wonder that as we've become an increasingly stifled society on an intellectual level that we've fallen further and further behind technologically?
Its kind of sad we used have guys like shockley, moore, kilby etc. The reason why silicon valley is called silicon valley. Now we are just falling behind Taiwan, south korea, and maybe china.