It has been an unbelievable year for the chief executive of TSMC. Four years after CC Wei took over as the sole chief, the Taiwanese chipmaker has broken record after record. The share price has also doubled during that time. But Wei will need some bold New Year resolutions as he heads into a tough 2023.
Sales have been strong this year. August’s $7.1bn total was yet another monthly record high. US export bans imposed on China have just bought TSMC more than a decade of time against Chinese peers that had been catching up fast and undercutting prices.
Yet chip demand and prices are highly sensitive to a downturn in the semiconductor cycle or the global economy. Wei cannot expect a repeat in 2023.
Competition poses a bigger challenge than the semiconductor cycle or an economic downturn. Samsung and Intel are both going all in on 2nm technology. TSMC has just started mass production of its 3nm chips, while Samsung already started shipping in July. That could mean a delay for Apple, TSMC’s key client. There is little brand loyalty in the chip industry. Staying at the top of the list of customers comes down to one thing: who can ship the most advanced chips.
Another problem comes from inside. The current talent shortage at global chipmakers has never been more serious. Competitors, especially Chinese companies, have been poaching engineering talent from TSMC for years. Now, the talent war is local. Taiwan’s MediaTek and United Microelectronics are both planning to hire thousands of employees at home. US-based Micron, Intel and Nvidia as well as global chip gear makers ASML and Applied Materials are also hiring heavily in Taiwan. Wei will have to pay up to keep talent from leaving.
Warren Buffett’s Berkshire Hathaway has chosen TSMC as one of its biggest ever Asian tech investments. The stake has given the stock a boost. But as a 20 per cent drop in BYD shares after Berkshire Hathaway cut its stake shows, that could prove to be a double-edged sword.