Rising Demand for Computer Chips Driven by AI

TAIPEI – The relentless advancement of artificial intelligence (AI) has ignited an unprecedented demand for computer chips worldwide. As industries embrace automation and robotics, the hunger for high-performance chips has surged. Among the key players in this dynamic landscape is the Taiwanese Semiconductor Manufacturing Company (TSMC), a global leader in cutting-edge chip production.

Generative AI Chip Market Boom

Deloitte Insights predicts that the market for specialized chips optimized for generative AI will exceed US$50 billion by 2024, constituting two-thirds of all AI chip sales. These generative AI chips, designed for tasks like deep learning and neural networks, are revolutionizing industries ranging from autonomous vehicles to healthcare.

TSMC’s Role in Meeting the Demand

TSMC, founded in 1987, pioneered the semiconductor foundry business model. Over the years, it has evolved into the world’s largest dedicated semiconductor foundry, serving 528 customers and manufacturing 11,895 products for diverse applications. Here’s how TSMC is addressing the surging chip demand:

  1. Global Expansion: TSMC has strategically shifted from producing chips solely in Taiwan to establishing fabs (fabrication facilities) overseas. These fabs are now being built in Germany, Japan, and the United States. The move ensures geographic flexibility and mitigates risks associated with overreliance on a single location.
  2. Challenges and Premium Pricing: Building fabs outside Taiwan comes with higher costs due to factors like power, labor, and materials. TSMC acknowledges these challenges and plans to charge a premium for chips produced outside Taiwan. Customers requesting specific locations will share the incremental cost. For instance, chips made in Arizona on TSMC’s N5 and N4 nodes could be up to 30% more expensive than those produced in Taiwan.
  3. Geopolitical Considerations: TSMC’s global expansion also addresses geopolitical concerns. By diversifying its manufacturing base, TSMC reduces vulnerability to disruptions caused by regional tensions. Should China invade Taiwan, chip production would continue unaffected in other locations.
  4. Sustaining Gross Margins: TSMC aims to sustain its target gross margin of 53% by transferring additional costs to customers. While American chip designers may face increased production costs, they can pass these on to less price-sensitive markets, such as government contracts.
  5. Technology Leadership: TSMC leverages its technological prowess and large-scale manufacturing base to minimize the overseas cost gap. Collaborating with governments and pricing strategically, TSMC remains at the forefront of chip innovation.

In today’s interconnected world, the demand for AI chips transcends borders. TSMC’s global expansion ensures a steady supply, innovation, and economic success, even in the face of geopolitical uncertainties. As AI continues to reshape industries, TSMC’s role remains pivotal in powering the digital revolution. (zai)