TSMC net profit ($10.5bn) higher than Intel ($10.3bn)

Martian

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TSMC revenues were $29.5 billion for 2016. In contrast, "Intel brought in $59.4 billion" in sales.

However, in terms of net profitability, TSMC was more profitable than mighty Intel.

"For the whole of 2016, TSMC posted NT$334.25 billion in net profit."

The exchange rate was "($1 = 31.7190 Taiwan dollars)" on January 12, 2017.

This means TSMC had a net profit of $10.5 billion US dollars for the year 2016.

"Net income [for Intel] was down 10% to $10.3 billion."
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TSMC reports record high net profit for Q4 2016 | Focus Taiwan


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UPDATE 2-Taiwan's TSMC chief praises Trump's US jobs goal as Q4 profit sets record | CNBC


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Intel Announces Record Quarterly Revenue And Full-Year Revenue For Q4'2016 | AnandTech

 

Martian

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Intel has twice the revenues of TSMC.

However, TSMC is slightly more profitable than Intel. This means TSMC has net profit margins that are twice as high as Intel.

Now that TSMC has surpassed Intel in net profitability, the pressure is on Intel to catch TSMC.

TSMC has consistently increased its net income by about $2 billion per year, while Intel's net income has stagnated.

TSMC's primary business is fabricating RISC semiconductor SoC (ie. System on a Chip) for smartphones.

Intel's primary business is fabricating CISC semiconductor x86 CPUs.

However, TSMC is encroaching into Intel's businesses. Firstly, Acer's Chromebook is based on TSMC-fabricated SoC. Secondly, the computer server market will become contested by ARM-based SoC. Finally, an SoC-based desktop computer will eventually challenge Intel's x86 stronghold.

In its counter-attack, Intel has spent the last eight years trying to gain marketshare in the smartphone SoC market. To date, Intel has failed with heavy losses from its contra-revenue subsidies to buy marketshare as the smartphone CPU.

When you watch the presentations by Intel, the company constantly compares its logic-chip process technology to TSMC. Hence, Intel and TSMC are direct competitors and the two strongest logic-chip technology leaders.

The key is that TSMC now has the advantage. We have seen TSMC grow from a small company to become today's giant. Now that TSMC rivals Intel in net profitability, the pressure is on Intel to perform and not let TSMC pull too far ahead in net income.

With last year's net profitability of $10.5 billion, TSMC has vast resources and is seeking to expand its semiconductor business. TSMC is a bidder for Toshiba's 3D NAND flash memory business. If TSMC is successful in its Toshiba bid, it could expand into a truly gigantic semiconductor company.
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Intel claims logic-process technology advantage over TSMC


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TSMC claims Intel logic-process technology advantage is non-existent

 
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Martian

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Taiwan's TSMC and Intel are converging and their businesses overlap in many areas.

Firstly, Intel set up its Intel Custom Foundry in an attempt to take business away from TSMC. The only significant success was Intel Custom Foundry in winning Altera's 14nm FPGA contract. However, Intel was three years late in the promised delivery of a 14nm FPGA based on Intel technology and ended up buying Altera for $16.7 billion (to probably avoid a lawsuit and damages).

Secondly, Intel lost a maximum of $4 billion per year in trying to secure marketshare in TSMC's SoC market for smartphones and tablets. The $4 billion burn was unsustainable and according to SemiWiki, Intel lost only $2 billion in contra-revenue last year.

Thirdly, TSMC is the first company that is taking the logic-chip process-technology lead from Intel. TSMC's 16nm was briefly the world's most advanced node. Intel retook the lead with its 14nm. However, TSMC is about to move ahead permanently with its 10nm (this month), 7nm risk production (this month), and 5nm risk production (first half of 2019).

Fourthly, Intel lite-notebook computer business is beginning to see competition from Acer Chromebooks that operate on TSMC-fabricated MediaTek processors.

Fifthly, “The Qualcomm Centriq 2400 series processors will drive high performance, power efficient ARM-based servers from concept to reality.” ARM chips are RISC-based and Intel is starting to face competition from companies that are almost as large as itself. Given the cost-advantages of ARM-based chips. Intel's marketshare in computer servers is likely to decrease over the next few years.

Sixthly, "Microsoft and Qualcomm have teamed up to bring Windows on ARM chips—again—to PCs, but with a powerful caveat: they've added support." This means both Microsoft and Qualcomm are supporting RISC ARM-based chips for PCs with Windows 10.

The overlap between TSMC's and Intel's businesses is clear. They are direct competitors and Intel has lost over $10 billion in total contra-revenue in trying to invade TSMC's businesses. Since RISC-based ARM chips are significantly less expensive, Intel's monopoly in x86 chips looks vulnerable. Customers do not want to pay monopoly-like prices for Intel computer chips.

In conclusion, the next few years will determine whether Intel can compete with TSMC over the long term. Intel spent $5.5 billion to manufacture 3D NAND memory chips at its China-based Dalian fab. "Today, Intel is shipping 3D NAND from its Dalian-based fab." With TSMC's bid for Toshiba's 3D NAND flash memory business, TSMC and Intel will continue to clash.
 

Martian

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There is no way to replicate Intel's x86 design without infringing on Intel's patents. The only exception is AMD (with the latest release of the Ryzen CPU). AMD is in a unique position, because IBM originally demanded a second source for the CPU in IBM PCs. AMD is also used by Intel to fend off charges of anti-trust by the US government.

The ARM-based camp, which includes TSMC, is using much less expensive RISC-based CPU cores to emulate x86 performance. Since multiple cores are cheap and plentiful in the ARM designs, a couple of cores are used to emulate the x86 instruction set and the rest of the cores are used for data processing.

The barrier in both servers and desktop PCs is the lack of optimized software to run on the heavily multi-core ARM-based designs. With time and lots of money invested from Qualcomm and Microsoft (on the Windows 10 for desktop PCs), it should only be a matter of time before Intel is under siege in both the server and desktop PC markets.

Regarding ARM-based SoCs for servers, there is the new "Qualcomm Centriq 2400, the world's first server processor built on a 10-nanometer process node."

It is unclear whether Intel has 3, 5, or 10 years left before its core businesses in computer servers and desktop PCs are heavily eroded. That is the point of monitoring the net profitability of Intel and TSMC every year. The net profitability measures the amount of financial resources that each company has available to invade the other's market. In the next 10 years, only one company will be dominant in the semiconductor logic-chip industry. It's either going to be Intel or TSMC.
 

Martian

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Intel revenues have stagnated for the last four years (when you exclude the recent addition of including Altera's sales via Intel purchase).

Intel's net profit has also stayed flat.

Intel's key market in desktop PCs shows no growth or slight declines every year.

In April 2016, Intel announced it was laying off 11% (or 12,000 people) from its workforce. (Intel to lay off 11% of workforce in big shift from PCs | USA Today)

Intel is a company in stagnant markets with a shrinking workforce. Intel will probably have to reduce its employee count again, because AMD's Ryzen 7 1800X CPU ($499) offers a similar performance to the Intel Core i7 6900K ($1,050) at half the price.

In contrast, TSMC is giving each of its employees a bonus of $34,750.

The difference between TSMC and Intel cannot be more stark. TSMC posts consistently higher sales (up $3 billion) and net profits each year. Intel is stuck in the mud. Unless Intel does something drastic, it will be overshadowed by TSMC.

For the last eight years, Intel's contra-revenue program did not work. Intel's contra-revenue strategy was successful against AMD, because AMD was a minnow that barely broke even each year. However, TSMC is the worldwide leader in the foundry business with 59% worldwide market share and it is extremely profitable. Intel's contra-revenue program never put a dent into TSMC's growth.

Intel tried to squeeze TSMC by offering Intel Custom Foundry services. The estimate in the semiconductor industry is that an Intel wafer costs about three times as much as a TSMC wafer at the same node. Not surprisingly, Intel has gotten nowhere with its Custom Foundry service. With negligible revenues, Intel refuses to break out the sales for Intel Custom Foundry.

TSMC's businesses in the smartphone and tablet SoC markets look unassailable. Intel tried its best and spent over $10 billion to encroach into TSMC's businesses and has little to show for it.

TSMC also looks bulletproof going forward. TSMC's advanced 10nm technology is solidly booked by Apple. It is a similar story with TSMC's 7nm and 5nm technology. Apple is the world's largest (by market cap) and most profitable company. Apple's iPhone is a solid customer for TSMC advanced logic-chip process technology.

On the other hand, Intel looks vulnerable in the notebook computer market (with competition from a growing line of Chromebooks), servers (from Qualcomm's Centriq 2400), and desktop PCs (from Qualcomm's and Microsoft's partnership in supporting Windows 10 for Qualcomm Snapdragon processors).

At the end of this year, we'll take a new look at the scorecard and review the net profitability for TSMC and Intel to see who's winning and losing.
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TSMC employees earn NT$1.07 million in cash, profit-sharing bonuses | Focus Taiwan

 

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