I want your market and you to pay for it

I have followed TSMC very closely since I started my career in the semiconductor industry. A brilliant combination of bold business bet (by founder Morris Chang), industry tailwinds (with the rise of fabless semiconductor model), forward-thinking from the Taiwanese government (who helped launch TSMC), and technological progress, it’s been fascinating to see the company enter the public consciousness.

In hearing about TSMC’s investment in the very aptly-named ESMC (European Semiconductor Manufacturing Company), I can’t help but think this is another brilliant TSMC-esque play. TSMC gets:

• Guarantee outsized market share in leading edge semiconductor technology in Europe
• Paid for in part by some of their largest customers (Infineon, Bosch, and NXP) who will likely commit / guarantee some of their volumes to fill this new manufacturing facility
• AND (likely) additional subsidies / policy support from the European Union government (who increasingly doesn’t want to be left out of advanced chip manufacturing given Asia’s current dominance and the US’s Inflation Reduction Act push)

TSMC has managed to turn what could have been a disaster for them (growing nationalism in semiconductor manufacturing) into a subsidized, volume-committed factory.