Recently, TSMC suddenly announced that Chairman Liu Deyin will retire after the 2024 shareholder meeting. At the same time, TSMC's Nomination and Corporate Governance and Sustainability Committee recommended Vice Chairman Wei Zhejia to take over as the next Chairman, and stated that the results of the next Board of Directors election in June next year will be the main focus.
In 1987, at the age of 56, Zhang Zhongmou founded the world's first professional wafer foundry company - TSMC. From then on, the previously centralized IDM model of semiconductor giants was broken and entered a stage of professional vertical division of labor, while TSMC became the dominant player in the wafer foundry manufacturing industry. Until 2018, at the age of 88, Zhang Zhongmou retired from TSMC and established a "dual head system", which was handed over to Chairman Liu Deyin and President Wei Zhe's family.
Now that her retirement has been decided, Liu Deyin said in a statement, "I hope to step back and give back my decades of semiconductor experience in different ways, spend more time with my family, and start a new chapter in life."
Wei Zhejia, Vice Chairman of TSMC, currently also serves as the President of TSMC. Next, there is no consensus on whether TSMC will have one person at the helm or use new executives for division of labor, and the answer will need to be revealed next year.
The dilemma of building factories in the United States
TSMC has not publicly disclosed the reasons for Liu Deyin's sudden retirement, and there have been recent rumors in the industry that it may be related to factors such as TSMC's unsuccessful factory construction in the United States. However, there are also views that capacity layout is a strategy discussed by companies, and such a significant decision cannot be attributed to one person. Liu Deyin has previously responded that it is difficult to build a new wafer factory in a new area as smoothly as in the local area.
The controversy is still ongoing, however, building factories in the United States has become TSMC's current "heart knot", and it is currently in a dilemma.
Currently, TSMC is building a wafer fab in Arizona, USA, with an investment of $40 billion.
But against the backdrop of the United States calling for the return of manufacturing, the construction process is accompanied by high costs, talent shortages, and difficulties in obtaining subsidies. Reports of delays and slowing down construction have also been heard from time to time.
There is no turning back arrow when making a move, and TSMC is still pushing forward with such a heavily funded project. Wei Zhejia stated at the third quarter performance briefing that TSMC plans to start large-scale production in Arizona, USA in the first half of 2025.
However, from the current situation, almost none of them are satisfied, and whether TSMC can receive more subsidies and deliver production capacity on time in the future will also receive continuous attention from the industry. Undoubtedly, TSMC holds a special position in the industry and is situated at a technological core node, which is inevitably the focus of competition and controversy.
In recent years, TSMC has been jointly led by Liu Deyin and Wei Zhejia. In terms of general division of labor, Liu Deyin coordinates the overall strategy, communicates government relations, and is responsible to the board of directors, while Wei Zhejia is responsible for specific company business execution, production operations, and order management. The two of them fulfilled their respective roles and cooperated with each other, leading TSMC to explore new development paths. As Wei Zhe's family was more responsible for the company's specific affairs, there were also views that Liu Deyin's retirement had little impact.
Yao Jiayang, a senior observer in the semiconductor industry, analyzed to 21st Century Business Herald reporters: "TSMC should have a complete layout in building factories, without too much difficulty. The key is that the amount of subsidies will affect TSMC's financial performance. As for Liu Deyin's retirement, the overall market environment has changed too much in recent years, and he faces more challenges than Zhang Zhongmou. From a psychological perspective, it is normal to have so-called fatigue."
An industry insider told 21st Century Business Herald reporters, "Obviously, the successors of TSMC have not become true powerhouses. TSMC is more like a boat in the world political and economic landscape. Whether it is the lack of management powerhouses that prevent it from achieving its business goals, or whether the current landscape is destined to fail to bring it a strong management powerhouse, is worth observing."
The competition for wafer foundry intensifies
If we only look at the company's performance, during Liu Deyin's tenure, TSMC reached a new high and the company's international influence further increased.
However, in 2023, the decline in industry prosperity will also affect the upstream, and TSMC's performance will decline. It is expected that its revenue will decrease by about 10% year-on-year in 2023.
Currently, TSMC still holds a significant position in the wafer foundry market. According to TrendForce Consulting, in the third quarter of 2023, TSMC accounted for 57.9% of the top ten global wafer foundry companies in terms of revenue ranking. In addition, since the beginning of the year, TSMC's stock price has continued to soar by 36.96%. As of December 20, 2023, the company's market value has reached $518.849 billion, which is also due to the hot AI driving new markets.
TrendForce consulting analyst Zhong Yingting told 21st Century Business Herald reporters that TSMC benefited from PC and smartphone components such as iPhone and Android new phones, as well as urgent orders to replenish inventory of 5G and 4G mid to low-end phones. In addition, the high priced 3nm process officially contributed to revenue, offsetting the negative factor of declining wafer shipments in the third quarter, TSMC's revenue increased by 10.2% month on month to reach $17.25 billion. Among them, 3nm accounted for 6% of the revenue in the third quarter, while TSMC's overall advanced processes (including 7nm) accounted for nearly 60% of the revenue.
Despite TSMC's strong capabilities, Samsung, Intel, and others behind it have also been relentlessly pursuing and expanding production, becoming the main theme of global wafer foundry companies. In addition to building a factory in the United States, TSMC is also constructing its Kumamoto factory in Japan, which is a joint venture with Sony. The project is scheduled to be completed in September 2023 and shipped in December 2024. At the same time, there are also reports that TSMC is planning to build a factory in Germany and will jointly build a wafer factory with multiple semiconductor companies. The final investment amount may be close to 10 billion euros, mainly producing 28nm chips. If the investment plan is approved, this will be TSMC's first wafer factory in the European Union.
As part of its IDM2.0 strategy, Intel invested $20 billion in building two chip factories in Arizona in 2021, and also invested $3.5 billion in upgrading and renovating its factories in New Mexico. Earlier last year, Intel announced plans to invest over $20 billion to establish a completely new chip production base in Ohio. Building factories in Europe is also an important layout for Intel. In 2022, Intel announced that it will invest over 80 billion euros in the semiconductor industry in Europe over the next decade to expand its chip supply chain.
Samsung also announced an increase in P3 factory production capacity at the end of last year, but given the sluggish semiconductor market in the first quarter of this year, there are reports that Samsung is considering postponing this investment plan. Currently, Samsung's wafer fab in the United States is under construction, with plans to complete its first factory by 2023 and begin mass production in 2024.
Guo Zuorong, Senior Vice President of Research at Jibang Consulting, stated that 2023 will be a very challenging year for semiconductor foundry, with overall revenue declining by nearly 12.5% and demand relatively weak. It is expected that there will be a growth of 6.4% in 2024, and the high inventory that has lasted for nearly two years has gradually dissipated, with the possibility of a slight recovery. At the same time, whether in China, the United States, or Japan, regional competition has brought about a localization trend in production. In addition, the demand for AI chips will also drive the vigorous development of advanced processes, which will affect the semiconductor market situation next year.
It can be seen that under the influence of geopolitics, the global production capacity map of wafer foundry is undergoing changes; During the period of industrial transformation, competition and cooperation among top enterprises have become more intense. At present, TSMC has the wealth and technology, making it one of the top manufacturing companies in the world. In the changing environment, the industry is also paying attention to how this giant can continue to unleash vitality and avoid slipping into decline.