Taiwan Semiconductor's Numero Uno Position Hit This Crucial Roadblock, Could Lead To Samsung Scoring Big Customers

Taiwan Semiconductor Manufacturing Company Ltd TSM CEO CC Wei winced when his presentation at its recent tech symposium reflected its underperformance.

Wei's presentation showed that further miniaturization of the chip to create circuits around 4 billionths of a meter wide had only produced a 2% increase in performance, the Financial Times reported.

"Just relying on transistors is no longer enough to meet our demands today and to meet [the requirements of] the products you design," Wei said.

In 1965, Gordon Moore, co-founder of Fairchild Semiconductor and later Intel, had observed the transistor count per chip doubling every 24 months and predicted such exponential growth for the next decade. Although, for now, TSMC has a clear lead in manufacturing technology.

Beginning from N2, the generation of chips that TSMC plans to commercialize from 2025 will use Nanosheet technology, also known as Gate-All-Around (GAA). The transition is proving difficult. 

Samsung Electronics Co, Ltd's SSNLF yield problem led to its struggle to attract big customers for cutting-edge chip production. 

However, analysts do not expect Samsung's earlier adoption of GAA to help it catch up with TSMC anytime soon but said it could attract big customers like Alphabet Inc GOOG GOOGL Google and Tesla Inc TSLA.

But as much as TSMC is confident in its leading position now, chipmakers expect that critical tools and materials used for decades will need to be significantly changed or even replaced.

TSMC suspended the production of advanced silicon for Chinese startup Biren Technology to ensure compliance with the U.S. embargo on the country.

Rising Taiwan-China and U.S.-China tensions have brought "more serious" challenges for the semiconductor industry, TSMC Chair Mark Liu said at the Taiwan Semiconductor Industry Association's annual convention.

With sagging demand as red-hot inflation squeezed spending, Taiwan faced a stricter situation sandwiched between its largest export market China and its main international backer and arms supplier, the U.S.

TSMC, which makes most of its chips in Taiwan, cut its annual investment budget by at least 10% for 2022 and struck a more cautious note than usual on upcoming demand. 

Price Action: TSM shares traded lower by 3.07% at $59.41 in the premarket on the last check Tuesday.