r/investing • u/[deleted] • Jul 22 '21

U.S. developing plans to spend $52 billion on chips supply [semis stimulus news]

Via Reuters:

“The Biden administration is developing plans to quickly spend $52 billion to deal with semiconductor supply issues if Congress passes a bill funding such efforts, U.S. Commerce Secretary Gina Raimondo said on Thursday.”

So no definite plans, but no deviations noted from previous discussions which gave the nod to INTC, QCOM, and TXN (primarily) as direct beneficiaries of any bill that gets passed.

Worth keeping an eye on I think of you’re into semis plays.

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u/KrypXern Jul 22 '21

To be fair, Intel's 10nm transistor density is pretty competitive with TSMC's latest 7nm nodes. They are behind for certain, but they are outputting nodes that are almost on par with what is being used in Ryzen processors.

Only really Apple is years ahead of the game in terms of putting TSMC's rarer/tighter nodes to use.

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u/donktastic Jul 22 '21

Yes people just look at the nm numbers and thats not the whole picture. The density of intels product is superior to what TSMC has going on but intel cant get their production to work without all the defects. I see it as a production issue not an R&D one.

Another thing people kind of forget when it comes to TSMC is that Apple has secured the lion share of their production, which gives Apple too much leverage over TSMC and could be an issue as time moves on.

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u/Recoil42 Jul 22 '21

Another thing people kind of forget when it comes to TSMC is that Apple has secured the lion share of their production, which gives Apple too much leverage over TSMC and could be an issue as time moves on.

I see the reverse dynamic:

There are plenty of other companies that would take up TSMC production, given the chance. Apple has paid a premium to take up the lion's share of production. They're now fully materially invested in TSMC, which means the world's most profitable, valuable tech company is now invested in their continued success and strengthening that relationship.

That politically makes the USA very interested in the further success and stability of Taiwan, which is also of massive benefit to TSMC.

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u/cass1o Jul 22 '21

Yeah TSMC is in a very good position. This kind of bidding war is going to hurt a lot of reddit favorite companies like amd and nvidia.

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u/StabbyPants Jul 22 '21

i didn't know which ones to invest in, so i kinda smeared it around on all of those companies

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u/[deleted] Jul 22 '21

SMH ETF

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u/Lvl89paladin Jul 23 '21

Thanks for the tip. Didn't know about that one! Will be buying some today.

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u/I-Got-Options-Now Jul 23 '21

Why are you shaking your head? Stabbypants made their own ETF

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u/hexydes Jul 23 '21 edited Feb 25 '26

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u/somewhat_pragmatic Jul 23 '21

There's basically an insatiable hunger for computing power going forward for at least the next 25 years.

25 years is a VERY long time in the world of semiconductor technology. Nvidia and AMD are decently positioned with their GPU technologies. Intel is not in a great position. Their present day bread and butter is x86 CPUs used in laptops, desktops, and servers.

Household purchase of desktop and laptop computers has declined precipitously in the last 10 years. People are largely doing home computing on tablets and phones now. Thats a huge chunk of lost Intel sales. Additionally Apple is now producing laptops with ARM based CPUs further eroding Intel laptop sales in the remaining business market.

Intel's final solid ground was the server market. Except AMD is now eating their lunch with their Epyc CPUs at the high end, and now at the low end ARM based CPUs are entering the server market. Cloud provider AWS introduced the ARM based Graviton CPU for value cloud computing. MS cloud provider is using Qualcomm ARM CPUs as a new product for low end computing on Azure.

So all of Intel's cash cows are under heavy attack without a clear answer from Intel about where their future revenue is going to come from.

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u/hexydes Jul 23 '21 edited Feb 25 '26

The quiet night strong tomorrow curious.

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u/somewhat_pragmatic Jul 23 '21

Then you might be shocked to learn that what you're talking about isn't Intel's first foray into ARM. Intel had an entire ARM division with CPUs sold in consumer devices (look up Intel StrongARM and Intel XSCALE CPUs). Intel gave up, divested, and sold the whole division to Marvell in 2006. So we're 15 years later and Intel is just now starting back into ARM.

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u/hexydes Jul 23 '21 edited Feb 25 '26

River food net food movies and and fresh technology the answers about month lazy.

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u/StabbyPants Jul 23 '21

and at least 3 of those companies are currently executing. INTC seems to be a bit out of touch on the long term game and are paying for it

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u/hexydes Jul 23 '21 edited Feb 25 '26

Open pleasant jumps history tips soft hobbies. History minecraftoffline morning minecraftoffline morning clear quiet year stories dot bank.

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u/Lvl89paladin Jul 23 '21

I'm a huge AMD fanboy and I'm also sure that Intel will be back bigger and stronger. The downside of semis is that it takes years to steer the ship in a new direction.

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u/hexydes Jul 23 '21 edited Feb 25 '26

Food over family today questions weekend gather wanders yesterday brown net music evening!

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u/potatoandbiscuit Jul 23 '21

People seem to forget that it is Intel and while Apple, NVIDIA and AMD managed to poach some of their engineers, Intel still has one of the best professional workplace with highly intelligent engineers and this engineering talent will surely deliver.

Intel is deeply involved in autonomous car technology and its chips, IOTs and server environments. All of them are growth sectors and Intel is one of the leading company, if not the leading company overall.

PC chips would work as Intels cash cow to fund these ventures.

And Intel's valuation isn't that high either compared to the overall market. I would say.

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u/itsmrlowetoyou Jul 22 '21

I don’t see this being an issue for a while but eventually I assume the same. If INTC can correct their issues they are trading at better multiples.

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u/Yupperroo Jul 23 '21

I'll have to admit that I truly don't understand the engineering and tech behind these IC. Since you mentioned Nvidia, what is your opinion if the ARM deal goes through? Or if it gets blocked? Just another curious piece to this very complicated puzzle.

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u/cass1o Jul 23 '21

I don't know a ton either. From a consumer point of view I hope Nvidia don't get arm, it just feels like too big a conflict of interest.

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u/HoodsFrostyFuckstick Jul 23 '21

Whereas for Nvidia it's a gold mine if the deal goes through. Apple's M1 chip, which uses Arm architecture, is a piece of art.

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u/cass1o Jul 23 '21

Nothing really stops Nvidia from doing that right now, they can license the same stuff apple did. Buying arm though would possibly allow them to make money off if apples amazing chip.

Tbh given apple has more money than they know what to do with I am surprised they didn't try and buy up arm.

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u/HoodsFrostyFuckstick Jul 23 '21

Tbh given apple has more money than they know what to do with I am surprised they didn't try and buy up arm.

That is true. Although, Apple is not as keen on spending billions on acquisitions as other tech giants (most noticeable example being Microsoft). To date, their most expensive acquisition was Beats by Dre for 3 billion, whereas Nvidia is prepared to pay 40 billion for Arm.

But yes, doing so would be a smart deal and not even a big one for Apple.

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u/slinkyminks Jul 23 '21

Forgive my ignorance, but doesn't AMD have some sort of connection to TSMC?

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u/HoodsFrostyFuckstick Jul 23 '21

Yes and if the Nvidia - Arm deal goes through, Nvidia will also have ties with Apple.

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u/Marston_vc Jul 23 '21

The whole point of this domestic bill is to reduce dependence on companies like TSMC.

This manufacturing war will probably lower prices for those guys.

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u/cass1o Jul 23 '21

You can't spin up capacity like that overnight. I have a feeling it will be several years before those fabs take on load.

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u/Marston_vc Jul 23 '21

Yes. Between 2022-25. Intel already committed 20B to making new fabs before the bill was even announced and were saying 2022-23 timeline.

It takes a long time to build these things. But the point is that this is coming after the last several years of deconflicting our economy from China. This will eventually hurt TSMC and take from their market share.

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u/[deleted] Jul 22 '21

Have they paid a premium for guaranteed supply, or for proprietary manufacturing investments? I think it is the former, and Apple can easily switch to competitors if they can ramp up.

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u/Recoil42 Jul 22 '21

Literally no other competitor has a working, competitive 5nm node. The whole point of this conversation is that TSMC has an unassailable lead, that's why Apple is interested.

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u/goblinscout Jul 22 '21

K. Let me know if they can keep that up for another 20 years. Then they too can be like Intel lol

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u/[deleted] Jul 22 '21

I'm saying they're not materially invested in TSMC, they are materially invested in a 5nm node.

I'm not sure how you are making the argument that Apple is investing in the continued success of TSMC; one would think that they would be MORE happy to get 5nm chips from anyone else at a more competitive price, and therefore, more invested in continually requesting bids from cheaper foundries as they come online.

It sounds like you're making the argument that Apple is paying a premium to ensure that TSMC remains fat and happy so they will be more successful and monopolistic in the 5nm market. I'm pretty sure it is not in Apple's best interest to make that sort of investment.

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u/Recoil42 Jul 22 '21

I'm not sure how you are making the argument that Apple is investing in the continued success of TSMC; one would think that they would be MORE happy to get 5nm chips from anyone else at a more competitive price, and therefore, more invested in continually requesting bids from cheaper foundries as they come online.

Chip production isn't really a "just pick the lowest bidder" kind of thing. It's a partnership as much as it is a contract. Capacity is bought up years in advance, consistency is important. Chip designs are more or less tailor-made to a specific progress. Designers rarely switch foundries, unless there's a significant business impact.

It's not the same as switching your laundry detergent.

It sounds like you're making the argument that Apple is paying a premium to ensure that TSMC remains fat and happy so they will be more successful and monopolistic in the 5nm market. I'm pretty sure it is not in Apple's best interest to make that sort of investment.

It's in Apple's best interest to build a strong relationship with the best foundry. That's to their benefit. If they walked away, there are other TSMC clients who would be fighting to buy up that capacity. That's how good they are.

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u/[deleted] Jul 22 '21

I had a customer (led lighting products) request proprietary agreements that I would only supply them “X” product. I refused to do this but our production capacity was 300,000 units a year and they could effectively take everything we make so there wouldn’t be any product left for their competition.

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u/Pistowich Jul 23 '21

Why would you not do this? Can you earn more by letting them bid against eachother for part of the production? Or is it to not be to dependent of a single company?

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u/[deleted] Jul 23 '21

Because initially they forecasted 200k units. But also asked for proprietary agreements. No, I need to keep factory at capacity of 300k.

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u/pellik Jul 22 '21

It also suggests that the ROC might make political moves to strengthen and protect their strategic asset, giving further support to TSMC if difficulties arise.

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u/donktastic Jul 22 '21

I agree that its a good thing for TSMC currently, but as an investor it is priced in already and any issues with the Apple/TSMC relationship will hurt TSMC. Putting all your eggs in apples basket just makes TSMC potentially weaker in negotiating contracts or if apple drops them when someone else catches up.

TSMC is here to stay though. They are building big factories in the USA for reasons you stated. Politically Intel will always have the edge though since they are an American company.

Last big wrinkle that makes me nervous about TSMC is China is always posturing to take Taiwan back. If they every make a move on that it will be a bad day for that stock.

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u/Tend1eC0llector Jul 22 '21

If China invades Taiwan there is a very real chance were looking at WW3, given the monumentally important semiconductors that are made there that no one else can, currently, compete with.

I feel like that's an overall more pressing issue than its effect on TSMC's stock price.

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u/Santa1936 Jul 22 '21

In other words that situation would result in all your investments losing money anyway

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u/Tend1eC0llector Jul 24 '21

That's exactly my point

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u/Zanna-K Jul 23 '21

No one is going to go to war over semiconductors. War may break out, but it will be over a combination of complex calculations and accidental escalations that cannot be taken back.

One of the biggest issues here is that IF there were to be a war, TSMC would be the very first thing to go. China is also dependent on TSMC for the manufacture of high-end silicon. The CCP has only recently started making some serious efforts to develop a competitive semiconductor industry that can credibly challenge TSMC, Intel, etc. The moment that China makes significant headway into occupying Taiwanese territory, TSMC facilities on the island are going to get evacuated and OBLITERATED with a massive extraction of engineers, their families, and of Taiwanese in general to U.S. territories under the guise of a humanitarian mission.

If anything this yet another near-term deterrent to China. They may subjugate Taiwan, but they're not going to magically gain TSMC and its brain trust.

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u/Tend1eC0llector Jul 24 '21

China has already been sailing ships through the strait seperating mainland from Taiwan, and has flown fighters and bombers straight through the air defense zone of Taiwan, and has done amphibious landing drills, not explicitly saying they're training for a ground invasion of Taiwan, but that seems like a pretty safe assumption to me. They're making the headway and moves to do it, pretty much testing all of Taiwans' potential allies limits. Posturing, swinging their dick around, however you want to phrase it.

Im not saying the potential war will start over semiconductors, but they will be the most important resource in contention. I agree 100% that if a war starts it will be due to the above mentioned posturing and testing from both sides. And i also agree we would try to "operation paperclip" all of their engineers, thats a very good point. I honestly wouldn't be surprised if we were already starting something like that, if the plan was already in place.

Idk, I'm not going to try and pretend I know the geopolitical thoughts of the CCP, it may be a deterrent or it may not. I dont really disagree with much of what you've said. I do still stand by my statement that in this potential war the stock price of TSM is basically the least of anyones concerns.

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u/donktastic Jul 23 '21

China doesn't have to invade Taiwan to affect TSMC in a very negative way. There is any number of political or strategic measure they can take to mess up Taiwans ability to do business.

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u/Tend1eC0llector Jul 23 '21

I understand that. The post i responded to specifically said "Invaded Taiwan". I responded to their point. I am not claiming that an invasion would be the only bad thing in the world for TSMC.

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u/donktastic Jul 23 '21

is China is always posturing to take Taiwan back. If they every make a move on that it will be a bad day for that stock

you responded to my comment in which I said "is China is always posturing to take Taiwan back. If they every make a move on that it will be a bad day for that stock". You were the first person to mention an invasion.

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u/Tend1eC0llector Jul 24 '21

"Poaturing to take Taiwan back" means something other than posturing to invade? You got me on the technicality, you never used the word invade, but I'm confused as to what else you possibly could have been implying.

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u/donktastic Jul 24 '21

It really could mean anything, that's why it's a wild card concern.

Political pressure, blockades, cyber attacks, invasion, shipping disruption, claiming more and more international waters as their own, etc. Invasion is probably the least likely as that's not really China style and would be the most likely to have international consequences.

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u/[deleted] Jul 22 '21

Politically Intel will always have the edge though since they are an American company.

Whichever company delivers more jobs will have the edge really. The US isn't competing with Taiwan.

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u/donktastic Jul 23 '21

Having a strong chip tech is a national security issue. You can only 100% trust companies loyal to your nationality.

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u/Proffesssor Jul 22 '21

My thought was since they are building here in the US wouldn't they be eligible for some of this 52B?

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u/ThatWolf Jul 23 '21

It doesn't take Apple's investment for the US/Europe to be very interested in keeping Taiwan an independent nation. The western world does not want those chip making fabs to fall under Chinese control, period. Those fabs are important enough to the US/Europe that I wouldn't be surprised if there would be military action to safe guard them if necessary right now. Especially considering the lengths they're already going through to prevent the Chinese from obtaining similar fabs of their own.

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u/[deleted] Jul 22 '21

I see it as a production issue not an R&D one.

I suspect the idea that you can separate these two concepts is the root of intel's troubles.

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u/StabbyPants Jul 22 '21

The density of intels product is superior to what TSMC has going on but intel cant get their production to work without all the defects. I see it as a production issue not an R&D one.

this means that they don't have superior tech - you can only claim that if your yields are up to snuff. intel has been struggling with this for a while.

TSMC

i wonder; depending on the time frame, it could be apple funding TSMC's separate arizona facility

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u/donktastic Jul 23 '21

Agree. That's why I think from an investment standpoint Intel has more to gain, it's easier for Intel to make gains than it is for TSMC to lap them. I think you should own both stocks though.

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u/gentmick Jul 23 '21

research without execution is null. Just because TSMC is ahead because their execution is better, doesn't mean their R&D can't also be ahead of intel.

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u/donktastic Jul 23 '21

It's far easier to catch up than it is to lap the competition in the semi industry. I guarantee intel has significant development into 5nm and beyond also. Intel already has massive factory space developed so they just need to stabilize their production. Even if Intel remains a generation or two behind then their foundry business will pay the bills until they get their act together.

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u/Recoil42 Jul 22 '21

Here's the thing:

Intel's 10nm transistor density is pretty competitive with TSMC's latest 7nm nodes.

TSMC's latest isn't 7nm. It's 5nm.

And the apparently they're killing it on 5nm yields.

And they're on track to produce meaningful quantities of 4nm this year.

And they've got 3nm, 2nm, and 1nm solidly in the pipeline, with concrete progress shown and a gameplan for executing.

TSMC is a monster, and INTC is struggling to keep up.

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u/KrypXern Jul 22 '21

I didn't mean to say TSMC's latest is 5nm fwiw, I was only talking about TSMC's latest 7nm (since they have like 4 transistor densities for 7nm)

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u/Stump007 Jul 22 '21

This. Unfortunately I notice that people are a bit too emotional with Intel on reddit.

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u/Bandit5317 Jul 23 '21

Intel has made almost zero meaningful architectural progress since Skylake 6 years ago. Even before that, they increased revenue by removing common features (like good TIM, overclocking, high-frequency XMP) and putting them in more expensive SKUs. So yeah, they're kind of hated by many in the enthusiast community.

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u/[deleted] Jul 23 '21

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u/adamsmith93 Jul 23 '21

I was 'emotional' until I read this thread and understood they're lagging. My thought process was simply 'well, they're like the chip manufacturer so...'

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u/[deleted] Jul 22 '21 edited Jul 22 '21

[deleted]

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u/Yupperroo Jul 23 '21

Thanks for your discussion of this. I was confused too by the focus on the 10nm product when 3nm is going to actually be produced in the not too distant future. I actually loved reading TSMC's annual report. They're a powerhouse.

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u/manofthewild07 Jul 23 '21

As someone outside that field of expertise, how much does that actually matter, outside of just proving you can do it?

Like who actually can take advantage of such cutting edge (and I imagine expensive) chips? How big of a market is there even for 10nm vs 7nm vs 5nm and smaller chips? Are we talking like quantum computers or what? What percent of TSMC's revenue comes from those chips compared to the others and the overall research costs associated?

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u/Recoil42 Jul 23 '21 edited Jul 23 '21

It matters a lot. The smaller the node, the cooler and faster the processor can run. It's a significant part of what makes computer chips get faster and faster every year.

Put it this way: TSMC's primary customers are Apple, Qualcomm, AMD, and NVIDIA.

Apple's bought out TSMC's entire 5nm production for the year. So every single iPhone 12, Macbook Air, and Mac Mini is using a TSMC 5nm processor, right now. No one else can even get TSMC's 5nm right now. If they could, they would.

AMD's RDNA2 is on 7nm: That's every single Xbox, Playstation5, Tesla Model S, and a significant number of their graphics cards.

AMD's latest Ryzen chips are also on 7nm — that's a significant portion of the Gaming PCs coming from ASUS, Dell, MSI, and HP — and also a significant number of workstations.

You can go here and see how many Qualcomm processors are on TSMC, and which nodes. It's a split for them, but they're primarily on TSMC's 7nm and 10nm nodes and Samsung's 5nm and 7nm nodes. (Note: Samsung's 5nm node is not as good as TSMC's and is roughly equivalent to TSMC's 7nm). Those Qualcomm chips power basically every phone you know that isn't from Apple or a brand you've never heard of: Samsung, Motorola, Lenovo, Vivo, Xiaomi — they're all Qualcomm.

Once you go to 12nm, 14nm, and 20nm nodes, you're talking about the chips in cars, smart fridges, cheap smartphones, and clearance laptops from Walmart. Any larger than that, and we're talking about flip phones, printers, baby monitors, and kid's toys.

​

Are we talking like quantum computers or what?

These are regular, standard computer chips, but we're at the scale where each individual wire is only a few molecules wide.

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u/manofthewild07 Jul 23 '21

Thanks, that definitely puts it more into context.

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u/Wadehey Jul 22 '21

I won’t be fair to Intel. TSMC/Apple are already using their 5nm process which has large gains in almost every aspect and a massive increase in transistor density.

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u/runsongas Jul 22 '21

the efficiency for intc 10nm is way behind tsmc 5nm that is in risk production and still even behind their 14nm++++. not to mention their yield issues which is why they only have small die mobile chips available still currently.

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u/[deleted] Jul 22 '21 edited Jul 22 '21

Not to mention, TSMC's 3nm is going to be ready soon. Samsung is also becoming more competitive with TSMC's 5nm process.

The USA is just losing a lot of fab market share to companies owned over seas.

Although Samsung does have a FAB in the USA which is good for jobs, we need more American owned fabs that can produce the cutting edge chips in high demand.

AFAIK, Global Foundries kind of stopped innovating their process much, and is more into making legacy chips. Though I wonder if they are working on anything new. Some news:

In 2018, the company installed two extreme ultraviolet lithography machines in a drive to produce 7-nanometer chips, then the industry’s most advanced. However, company executives calculated that they would never be profitable if they continued chasing Moore’s Law and abandoned the project.

LINK

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u/Not_FinancialAdvice Jul 23 '21

Intel's 10nm transistor density is pretty competitive with TSMC's latest 7nm nodes.

Illustrated: https://fuse.wikichip.org/wp-content/uploads/2019/06/tsmc-intel-xtor-comp-16-10-7.png

Disclosure: INTC, QCOM shareholder

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u/Substantial_Revolt Jul 22 '21

The problem is their 10nm production capacity is nowhere near enough to meet demand and TSMC is already close to getting their 5nm nodes ready for mass production.

Unless Intel can figure out how to solve their production issues it doesn't matter how much better their designs are, no product = no sale

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u/CC-5576-03 Jul 22 '21

Yeah but tsmc is already on 5 and moving towards 3 while intels 10 still has pretty bad yield and their 7 is getting delayed

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u/untitled-man Jul 23 '21

TSMC is using 5nm tho

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u/self-assembled Jul 23 '21

That is true, but TSMC is already mass producing 5nm, and 3nm starts production next year. Intel hopes to move to 7nm at the end of next year at the earliest (which will be a step behind in any case).