TSMC, every mention

TSMC · Acquired Jan 21, 2025 · 100 mentions

• ▶ 0:55 David Rosenthal And it turns out they even manufacture a lot of chips for Intel, too.
• ▶ 1:02 David Rosenthal Yeah, TSMC rode the smartphone era to crazy heights, as we all know, and here now in the next AI era, here in twenty-twenty-five, it turns out that they are the manufacturing superpower behind all of that, too.
• ▶ 1:16 Ben Gilbert Well, listeners, without doing too much foreshadowing, now is a very good time for anyone to listen or re-listen to the TSMC episode, so we decided we should go all the way back to the raw audio tracks and remaster this whole thing from…
• ▶ 1:37 David Rosenthal TSMC's market cap has doubled since then,
• ▶ 1:50 David Rosenthal They and Saudi Aramco are the only trillion dollar companies in the world that are not located on the west coast of the United States.
• ▶ 2:00 Ben Gilbert It's crazy that the rest are located on the west coast of the United States, but it really underscores what a extreme outlier TSMC is.
• ▶ 2:07 Ben Gilbert So without further ado, the story is truly unbelievable, and we hope you enjoy this presentation of TSMC Remastered.
• ▶ 2:44 Ben Gilbert Today's episode is on TSMC, or the Taiwan Semiconductor Company.
• ▶ 2:57 David Rosenthal Founded TSMC at age 56, retired at 74, then came back at age 78, inked the deal to make all of Apple's chips, and yeah, we're gonna tell the whole story here.
• ▶ 3:11 Ben Gilbert They make literally every chip in every iPhone sold today, and soon to be in every Mac sold.
• ▶ 3:25 Ben Gilbert All of those chips, or nearly all of them, are actually made by TSMC, along with all the chips in your cars and your smart home devices and fighter jets and everything.
• ▶ 3:35 Ben Gilbert Unbelievably, this company that the entire world relies on is on an island that some countries feel is a sovereign nation, and the People's Republic of China feels is actually theirs.
• ▶ 4:14 Ben Gilbert And we've had TSMC on the agenda to do for like two and a half years now in our little Google doc.
• ▶ 19:56 David Rosenthal They were like the TSMC, the technology provider to oil companies, and that's what led them into computing and into digital to power that business.
• ▶ 23:35 David Rosenthal And, you know, fast forward today, the latest processor, you know, the five nanometer processors that TSMC and basically nobody else is churning out.
• ▶ 29:31 David Rosenthal And a little preview to fast forward to today, TSMC, they're a contract manufacturer for silicon.
• ▶ 29:38 David Rosenthal That is what they are.
• ▶ 29:39 David Rosenthal TSMC has 40% operating margins as a contract manufacturer.
• ▶ 29:44 David Rosenthal It's not like this is just, there's no technology or R&D, like, they are one of the most advanced technology organizations in the whole world.
• ▶ 45:04 David Rosenthal He's CEO of TSMC.
• ▶ 45:32 David Rosenthal Not like a TSMC style business, like as a TI plant there.
• ▶ 48:41 Ben Gilbert And so Morris wasn't going to Taiwan to start TSMC.
• ▶ 57:38 Ben Gilbert They outsource some of it to TSMC, and some of it to Foxconn, and maybe...
• ▶ 1:02:05 David Rosenthal This may be the craziest part about the whole TSMC founding story.
• ▶ 1:02:12 David Rosenthal Do you know what the pre-money valuation was on TSMC?
• ▶ 1:02:20 David Rosenthal Morris Chang got no equity in the company.
• ▶ 1:02:25 Ben Gilbert So, 100% of the company was owned by?
• ▶ 1:02:51 David Rosenthal Well, what he did as TSMC started to work, he basically put all of his money into buying.
• ▶ 1:02:58 David Rosenthal In the company.
• ▶ 1:02:59 David Rosenthal I don't know if it was privately before they went public on the Taiwan Stock Exchange in 1994 and then the New York Stock Exchange in 1997.
• ▶ 1:03:07 David Rosenthal But yeah, he put basically all of his excess cash flow into buying TSMC shares.
• ▶ 1:03:34 David Rosenthal And, okay, before we go on in the TSMC story, we need to have two real quick sidebars.
• ▶ 1:03:43 David Rosenthal When TSMC gets officially set up, they raise the money at a zero dollar pre-money valuation.
• ▶ 1:04:41 Ben Gilbert I was wondering, I don't actually know the relationship, because obviously, today, a huge amount of volume of TSMC's manufacturing is making chips for iPhones, which
• ▶ 1:05:01 Ben Gilbert So presumably there's some relationship coming between TSMC and ARM.
• ▶ 1:07:54 Ben Gilbert There's somebody before we get to the foundries, which is the equipment manufacturers that sell to TSMC.
• ▶ 1:08:47 Ben Gilbert Their biggest customer is TSMC.
• ▶ 1:09:12 Ben Gilbert Is the beginning of the relationship between TSMC and their equipment provider.
• ▶ 1:09:20 David Rosenthal I mean, because, well, it's TSMC's insane capital operating cash flow production that enables them to spend capex above anybody else that allows them to buy more ASML equipment than anyone else.
• ▶ 1:09:43 Ben Gilbert When we told the team over at JPM that we were remastering our TSMC episode, they smiled and said, oh, we have the perfect thing for this episode that most listeners won't know about, but is super important to how international companies…
• ▶ 1:11:06 David Rosenthal But if you intend to be in business for decades, you know you're going to exist through all sorts of different geopolitical, macroeconomic, and supply chain climates, just like TSMC has.
• ▶ 1:13:57 David Rosenthal The short-term market is Morris basically begs all of his old colleagues in the US and European and Japanese semiconductor industries to just give the dregs to TSMC, and it really was the dregs, so here's Morris on what this was.
• ▶ 1:14:53 David Rosenthal To TSS.
• ▶ 1:16:06 Ben Gilbert There is a thing that you have to raise 10 to 20% of the capital that you otherwise would have needed to raise if TSMC exists.
• ▶ 1:16:21 David Rosenthal It's TSMC building the platform.
• ▶ 1:17:07 David Rosenthal For a couple years, TSMC has to survive on the dregs from the IDMs, the big guys.
• ▶ 1:17:16 David Rosenthal You know, little companies like Qualcomm, Broadcom, Marvell, NVIDIA, these are all started with TSMC.
• ▶ 1:17:32 David Rosenthal I believe a hundred percent with TSMC.
• ▶ 1:17:39 David Rosenthal You know, it took him actually a little while to get on Morris's radar, but once he did, the vast majority of NVIDIA's chips, TSMC makes them.
• ▶ 1:18:10 David Rosenthal But, this creates this insane flywheel for TSMC.
• ▶ 1:18:21 David Rosenthal As that happens, TSMC's revenue grows.
• ▶ 1:19:19 David Rosenthal So in the early 2000, when TSMC finally caught up to the bleeding edge level of technology with other semiconductor companies, there were 22 companies that were at the leading edge.
• ▶ 1:19:37 David Rosenthal 22 and TSMC finally broke into the pack.
• ▶ 1:19:40 David Rosenthal They were one of the 22.
• ▶ 1:19:49 Ben Gilbert It's basically Samsung and TSMC, right?
• ▶ 1:19:55 David Rosenthal Only TSMC and Samsung.
• ▶ 1:20:07 David Rosenthal TSMC is going to launch that next year.
• ▶ 1:20:14 David Rosenthal So, very likely in the next process, it's just going to be TSMC.
• ▶ 1:20:29 Ben Gilbert TSMC is totally fine with that, because their job is not to market.
• ▶ 1:20:38 David Rosenthal They run the table on the whole industry.
• ▶ 1:21:25 David Rosenthal From 22 down to two down to one, even when their competitors are only doing the one thing that TSMC has done, like, if you fall behind by a step, you're toast.
• ▶ 1:22:05 David Rosenthal And the scale of this now, I mean, TSMC just announced they're going to spend a hundred billion dollars in capex over the next three years, thirty billion dollars this year, 60 over the next two.
• ▶ 1:22:30 David Rosenthal Other options, because almost all their manufacturing is in Taiwan.
• ▶ 1:22:49 David Rosenthal But there's this marriage of scale economies and process power, the TSMC, like in this industry.
• ▶ 1:23:06 David Rosenthal I was listening to a podcast, a Bloomberg Outlots podcast about this, where they were talking about this, and their reporter who covers TSMC is great.
• ▶ 1:23:22 Ben Gilbert Because basically TSMC seems to have picked a side in the US, and so with a little bit of prodding, I'm sure, from various presidential administrations over the last five years.
• ▶ 1:23:32 David Rosenthal The guy who covers TSMC was like, they can do that, and they are doing that, but they wouldn't know what to do with it, and it's not because they're dumb.
• ▶ 1:23:40 Ben Gilbert To do this stuff, to make the equipment that ASML does, and to manufacture the way that TSMC does, it is the hardest thing to do in the world.
• ▶ 1:25:08 Ben Gilbert So you buy one, your TSMC, you buy one and it arrives in, of course, the seven 47, then there's a crew of ASML employees on site, not only to assemble it, but then to help you run it.
• ▶ 1:28:55 David Rosenthal We should compete with TSMC.
• ▶ 1:29:31 David Rosenthal And this is why TSMC has 40% operating margins.
• ▶ 1:29:40 David Rosenthal Okay, so a little while back, before we get totally geeked out on that, which was awesome, you said something like, how do we get this flywheel effect, you know, it's great, but like, how do we really get from TSMC?
• ▶ 1:30:50 David Rosenthal But still, great for TSMC.
• ▶ 1:30:58 David Rosenthal I've been buying TSMC stock with my own money.
• ▶ 1:31:08 David Rosenthal He hands the reins of TSMC over to his longtime Lieutenant Rick Tsai, and he retires.
• ▶ 1:31:50 David Rosenthal Surprise press conference, TSMC, summer 2009.
• ▶ 1:31:53 David Rosenthal They announce that Morris is returning to lead TSMC as CEO.
• ▶ 1:32:29 Ben Gilbert Like, from Morris to Rick, people kind of viewed it as, like, you didn't really do a great job bringing in the next CEO of the company.
• ▶ 1:32:46 David Rosenthal So that's one thing, but the other thing, so in the press release, there's a quote from Morris and he says, one, this move will not affect TSMC's fighting spirit and is likely to spur greater intensity.
• ▶ 1:33:57 David Rosenthal Well, even that's great for TSMC.
• ▶ 1:34:19 David Rosenthal And like, yeah, TSMC could now access some of that because AMD went fabless, but come on.
• ▶ 1:37:32 Ben Gilbert Not TSMC, or at least for part of it, and I think they actually even fab their chips in Austin, in the US.
• ▶ 1:37:48 David Rosenthal They're gonna have to go to TSMC, though, in the next generation, because you want three nanometer.
• ▶ 1:37:58 David Rosenthal Well, anyway, point is, Intel's dominance is over, and the index on all that's gonna take over is TSMC.
• ▶ 1:39:40 Ben Gilbert No, but Bloomberg reported that it was a really big risk for both companies, both Apple and TSMC.
• ▶ 1:39:47 Ben Gilbert Apple was relying on a company that was then seen as an also-ran, and the quote is, I think this is actually Jeff Williams, if we were to bet heavily on TSMC, there would be no backup plan.
• ▶ 1:39:59 Ben Gilbert And for TSMC, it meant an initial investment of nine billion dollars,
• ▶ 1:40:19 Ben Gilbert Designed by Apple, built on the PA semi acquisition, and of course fabbed by TSMC.
• ▶ 1:40:31 Ben Gilbert That they were solely TSMC?
• ▶ 1:40:41 Ben Gilbert I'm pretty sure some iPhones had Samsung fabbed A fours and fives in them, and some had TSMC fabbed ones.
• ▶ 1:40:55 David Rosenthal And I think that was all TSMC.
• ▶ 1:41:19 David Rosenthal Morris steps down as CEO again, but he stays on as chairman, and then finally, once it all plays out, and TSMC is on top, in June of 2018, Morris retires, presumably for real?
• ▶ 1:41:44 David Rosenthal TSMC
• ▶ 1:41:52 David Rosenthal They took 17 of the twenty billion dollars in operating profit and plowed it all back into capex last year in 2020.
• ▶ 1:41:59 David Rosenthal Beginning of this year, January 2021, they give guidance that they will raise capex from 17 last year in 2020 to 25 to twenty eight billion in 2021.
• ▶ 1:42:11 David Rosenthal In April of this year, twenty-twenty-one, they raised it again to thirty billion forecast for the year and a hundred billion over the next three years.
• ▶ 1:42:21 David Rosenthal That's like the real shot across the bow that everybody wakes up, the financial markets wake up, and they're like, holy crap, TSMC has cornered the market.
• ▶ 1:44:57 Ben Gilbert TSMC today.
• ▶ 1:45:04 David Rosenthal So since the first IPO in Taiwan in 1994, TSMC has had compound annual revenue growth of 17.4% for 27 years.
• ▶ 1:46:14 Ben Gilbert The other thing that just talking about financials today, so crazy that they grew 31% in revenue from 2019 to 20 20.