Fresh out of the studio, Tim Culpan, the Bloomberg columnist, joined us to discuss how the tech giants from China (Huawei, YMTC) and Taiwan (Foxconn, TSMC) are navigating a fragile global supply chain. Starting our conversation, Tim examined how Foxconn and TSMC are making key moves to ensure the resiliency of the global supply chain from contract manufacturing to semiconductors. As we moved on, Tim provided a glimpse into how the Chinese tech giants, Huawei and SMIC are addressing the same challenges and examined the key strategy for China to develop its own semiconductors. Last but not least, Tim broke down the amount of money that Warren Buffett from Berkshire Hathaway had left on the table after retreating from his recent position in TSMC.
"You're right. Now the US is trying very hard to get TSMC to move to the US and they're throwing money out - TSMC is going to Arizona. The CHIPS Act has been passed. That'll throw a lot of money around, but that won't be enough. In the currently announced plans - just purely what's been announced so far - I ran the numbers and estimated that TSMC's global capacity, only less than 5% would be in the US based on the currently announced plans. Now, I expect those plans to expand and broaden. They seem to have enough land and the possibility of up to four factories instead of two. They could even go to six, who knows? But even if they were to expand to the maximum of what might be possible in Arizona, I think still we'd get maybe 7% of global capacity in the US may be up to 10%. And it won't be the leading edge. The leading edge will still be in Taiwan. And that's not just for protection reasons. I think a lot of people think that all the Taiwanese don't wanna have the best in America because they're trying to hold onto it for themselves - which is true - but it's also an issue of practicality." - Tim Culpan
- Tim Culpan (@tculpan, Linkedin, Bloomberg), Columnist at Bloomberg
- Since our last conversation, what have you been up to?
China & Taiwan Tech Giants in a Fragile Global Supply Chain
- The last time we spoke, we discussed the tech cold war, and a lot has happened over the past 4 years between China and the US. Where are the Taiwan tech giants, for example, TSMC and Foxconn?
- Foxconn is still the largest contract manufacturer for Apple in the world, and they are still assembling the iPhones in China. What is the risk for both Foxconn and Apple if the supply chain starts to decouple? [Reference: Maybe Apple's Weakness isn't just supply chain woes, Bloomberg]
- Is Foxconn looking to expand its contract manufacturing somewhere, for example, Vietnam and India?
- How are the suppliers from Taiwan working with Apple?
- Are there any new developments for Foxconn in new areas of investment?
- Before we dive deeper into TSMC, can you describe the semiconductor supply chain from the design that comes from the US, the key machine from ASML, a company based in the Netherlands, the reference architecture from ARM, memory chips & NAND storage from Samsung and the role that TSMC is playing within the ecosystem?
- What is the impact on the consumer if the semiconductor supply chain falls apart?
- What are the key technological advancements for TSMC within the semiconductor supply chain?
- Given that Russia has invaded Ukraine, there are worries out there that China might do the same to Taiwan. Instead of talking about geopolitical risks which we are neither experts on the subject, I want to focus on the Taiwan tech giants. What will happen to both Foxconn and TSMC and the disruption that it will cause to the global supply chain if Taiwan falls? [Reference: 1/ The World's Chip Addiction is Propping up TSMC, Bloomberg, 2/ Sorry, USA, $40 billion won't buy Chip Independence, Bloomberg]
- Are there any key players in the semiconductor industry within China and how far are they in catching up with TSMC out there, for example, YMTC and SMIC?
- How are the companies such as Huawei currently sourcing their semiconductor chips given that supply is cut from them?
- Given the recent CHIPS act and efforts from the US and European governments to get TSMC set up in their respective countries, can the expertise really be exported to these countries such that the risk can be diversified?
- Warren Buffett has recently retreated from TSMC. How much money has he left on the table and what are the potential reasons why he pulled out his entire position from TSMC? [Reference: Buffett's TSMC Selloff Backs Apple Over Its Supplier, Bloomberg]
- Any recommendations which have inspired you recently?
- Tim's recommendation: Chris Miller, "Chip War" (and check out our video interview with Chris)
- Bernard's recommendation: Gary Marcus and Ernest Davis, "Rebooting AI'
- How can my audience find you?
Podcast Information: The show is hosted and produced by Bernard Leong (@bernardleong, Linkedin) and Carol Yin (@CarolYujiaYin, LinkedIn). Proper credits for the intro and end music: "Energetic Sports Drive" and the episode is mixed & edited in both video and audio format by G.Thomas Craig (@gthomascraig, LinkedIn).