HSINCHU, Taiwan: In the late Taiwan, the new chairman of the chip-making titan Taiwan Semiconductor Manufacturing Co., Mark Liu, got the sort of news that would make any boss: his biggest competitor was throwing in the towel.
Just under three months into Liu's tenure, rival GlobalFoundries had announced that it would not compete in the latest generation of chip-making technology. It was a reminder of just how dominant TSMC has become in manufacturing chips for other companies.
TSMC stock quickly hit an all-time high. But Liu's work seems to be getting tougher, not easier.
In an interview at the company's newly christened Morris Chang headquarters building, named after its founder, Liu said.
“The worst of you can imagine” can be very bad, “Liu said, referring to geopolitical developments such as the US-China trade war and tensions between Taiwan and the mainland.
The thoughtful, soft-spoken engineer took over from the ebullient and outspoken Chang at a tricky time.
Emerging competition from China casts an ominous shadow, and the intricate network of relationships that have enabled TSMC and its brethren in the global technology supply chain to thrive are under the threat of amid the trade dispute.
Worse, global smartphone sales have flattened. Purchases of smartphone chips by the likes of Apple Inc and Qualcomm have powered TSMC for a decade.
But Liu remains optimistic about that business.
“Smartphone units have a plateaued, but the silicon content of each smartphone on average is still increasing,” he said, projecting growth in the high single digits over the next couple of years. He said smartphones would continue to account for 40% to 50% of TSMC's revenue.
A slowing smartphone market was one of the reasons why. It is reduced capital spending for the year from US $ 11.5bil-US $ 12bil (RM47.71bil-RM49.79bil) to US $ 10bil-US $ 10.5bil (RM41.49bil-RM43.56bil) – a move it attributed at the time partly to more efficient equipment delivery and currency adjustments, but which
Meanwhile, new markets such as autonomous vehicles and the “Internet of Things” – interconnected consumer and industrial devices – have been slow to arrive. TSMC. Liu chuckled as he predicted self-driving cars would come “within our lifetime”.
“The Mark is an analyst at Sanford C. Bernstein.
Liu was more optimistic about the sophisticated chips that power data centers. The boost of TSMC and others has been made largely due to high-performance computing (HPC).
“They have an amazing architecture and will carry out other areas of HPC, including blockchain and artificial intelligence applications,” he said.
Moves by consumer tech giants such as Google to design their own chips.
Liu, who worked at Intel and AT & T's Bell Laboratories before joining TSMC in 1993, shares the job of running the company with chief executive C.C. Wei, another industry veteran.
Morris Chang, who ran TSMC for 30 years. One major investor, speaking on condition of anonymity.
Analysts say the company has some fresh opportunities with the pull-back of GlobalFoundries and could win more business from top chip vendors, including AMD and Qualcomm.
Still, Liu acknowledged that global overcapacity in an older production technology, stemming in part from the new investment by mainland Chinese firms, “gives you headaches”. The company said that the category accounted for 23% of the company's revenues.
And questions about long-term growth loom large. Liu expressed optimism that the current “cooling down” in smartphones would last only a couple of years before 5G technology drives a new round of growth.
But it is far from a sure thing.
“What they are doing right now is moderating their spending, and returning extra cash back to investors,” said Li of Sanford C. Bernstein. The big test for Liu, he added, is to prepare for something new, some growth in the next era.
Liu is confident that will happen, and said the company may increase spending on advanced production techniques in the light of the GlobalFoundries retreat. In China, where the company has pledged to invest US $ 3bil (RM12.44bil) on its latest factory, Liu said TSMC would stay on the offensive.
“We will (invest more) to make sure we have a local position to compete,” Liu said. – Reuters