Taiwan's TSMC Tops Intel by Market Value for First Time | Bloomberg

Martian

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Taiwan TSMC's market capitalization is now larger than Intel's. This is justified by the huge net profitability at TSMC (see third chart below). TSMC has consistently grown its net income every year after 2011. On the other hand, Intel's net income has stagnated or declined.

Intel is a stagnant company, because it missed at least two massive computer-chip industries.

Intel initially ignored the GPU (Graphics Processing Unit) market and allowed NVIDIA to dominate the GPU sector. NVIDIA has a market capitalization of $60 billion. TSMC fabricates GPU chips for NVIDIA.

Intel also missed out on the SoC (System on a Chip) market for smartphones. Apple, Qualcomm, and MediaTek dominate SoC chips. TSMC fabricates SoC chips for Apple, Qualcomm, and MediaTek.
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Chipzilla Got Toppled | Bloomberg

 

Martian

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Intel has two structural weaknesses that TSMC does not share.

Looking at the revenue and net income charts for Intel and TSMC, it doesn't take a genius to realize that TSMC grows relentlessly and Intel has flatlined. The key question is "why?"

Intel keeps losing ground to TSMC, because Intel has two major weaknesses that TSMC does not have.

Intel is a vertically integrated company that builds computer chips for itself. We are ignoring Intel Custom Foundry, because it is incredibly tiny with revenues of about $1 billion. In comparison, TSMC had revenues of $29 billion from building chips for customers.

Since Intel builds chips only for itself, the cost of the semiconductor fabrication plant is recouped only from Intel computer chips. With only one customer, Intel capacity utilization fluctuates with the vagaries of the sales for each product line. This is INEFFICIENT. In contrast, TSMC has 600 customers and semiconductor plant capacity utilization is very high. It doesn't matter if Qualcomm sales slowed this year, Apple or NVIDIA will make up the difference. Thus, TSMC's capacity utilization is very stable, because it follows the average sales growth of the entire semiconductor industry.

There are two ways for Intel to fix its structural weaknesses.

Firstly, Intel should have spun-off its fabrication plants a long time ago. Intel should have become a fabless company. Apple and Qualcomm have shown that huge profit margins do not require the costly investment into semiconductor fabrication plants. As a fabless company, Intel would have freed up $10 billion in annual capital-expenditures (capex) from its semiconductor fabrication plants.

Secondly, separating the semiconductor fabrication from Intel's IP (intellectual property) in x86 computer chips would have attracted customers to Intel Custom Foundry. Currently, no major fabless company is willing to turn over its latest computer chip designs to Intel and risk having Intel copy their technology.

Separating Intel's semiconductor fabrication from the x86 IP design would have rid Intel of the capex burden of sustaining an inefficient semiconductor fabrication capability in producing chips for only itself. Also, the separation of computer chip manufacturing from the x86 computer-chip patented design would have removed the conflict-of-interest in attracting customers to Intel Custom Foundry. With multiple large customers for Intel Custom Foundry, Intel would have finally achieved manufacturing efficiency equivalent to TSMC by having a large customer base to ameliorate the fluctuating demand from each individual customer.

With the compelling arguments for separating Intel's manufacturing from its x86 designs, why hasn't Intel done so? It's like a Greek tragedy. Intel is still living in the 1980s. Intel has a lot of pride and it's not about to spin-off the manufacturing into a fully independent company. This would effectively split Intel into two equal halves and no Intel CEO or Intel board of directors will do that on their watch.

Only an outside individual like myself would take the bold step of splitting Intel into a manufacturing company and an IP company to unlock the efficiency-gains. Of course, Intel would never appoint someone like myself with a vision for the future of Intel. Visionaries are not welcome at dinosaur companies like Intel.
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Taiwan Semiconductor Manufacturing Company (TSMC) Company Profile | DesignNews

"TSMC created the semiconductor Dedicated IC Foundry business model when it was founded in 1987. TSMC served more than 600 customers, manufacturing more than 11,000 products for various applications covering a variety of computer, communications and consumer electronics market segments."

 

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