Gelsinger Pissed Off TSMC Even Though He Was Right
Intel’s Gelsinger pissed off TSMC even though he was right about the precariousness of using a Taiwan island based fab.
Intel had a sweet deal going with Taiwan’s TSMC (2330.TW), opens new tab, the giant manufacturer of semiconductors for other companies. TSMC would make chips that Intel designed but could not produce. And it was offering deep discounts to Intel, say four people with knowledge of the agreement.
Instead of nurturing the relationship, Gelsinger – who hopes to restore Intel’s own manufacturing prowess – offended TSMC by calling out Taiwan’s precarious relations with China. “You don’t want all of your eggs in the basket of a Taiwan fab,” he said in May 2021, using industry jargon for a chip fabrication plant. That December, encouraging U.S. investment in U.S. chipmakers, he said at a tech conference: “Taiwan is not a stable place, opens new tab.”
In public, TSMC downplayed, opens new tab the comments, with its founder calling Gelsinger “a bit rude.”, opens new tab Privately, TSMC said it would no longer honor the discount, the sources said: about 40% off the $23,000, 3-nanometer wafers on which TSMC would print chips for Intel. Intel had to pay full price, shrinking its profit margin on the deal.
It may have been a bit rude to point out the obvious but at the end of the day what Gelsinger said is true and right. Taiwan is under great threat and chip supplies from the island are not guaranteed. You cannot rely on them. That’s exactly what the world does though. Taiwan has over 40% of the world’s fab capacity.
You cannot just sit on your butt and ignore the threat that China poses. The Chinese Communist Party wants Taiwan back and by god they are going to get it back unless the United States drastically increases assistance to the island… which it is not going to do regardless of who becomes president.
The world should be avoiding the construction of any fabs in South Korea or Taiwan and should probably reconsider even having major semiconductor input suppliers on the island of Japan. Geography matters in war and that’s what we’re talking about. Any conflict with China, whether it’s a blockade or invasion, would embroil the United States. The supply of virtually all electronics, semiconductors, and inputs would be held at risk by China. It is not that hard to send ballistic missiles crashing into Samsung’s and TSMC’s fabs. And China sure has plenty of missiles to launch. Just the threat of that happening will change the United States’ posture.
Ultimately we cannot continue as we have been. Something has to change. China is absolutely going to force Taiwan into submission. The CHIPS act and Gelsinger are good and right.
