Breakingviews - TSMC's global expansion will chip away at its edge
, and it has similar plans to do more elsewhere. Diversifying production provides a helpful geopolitical hedge, but also makes its financial edge more vulnerable.
Producing chips involves over 1,000 steps, meaning it’s better to keep all the moving parts close together. TSMC's tightly controlled factories are among the most efficient and profitable in the world, generating an annual gross margin of nearly 50% on average over the past three years. That has enabled it to pull ahead of peers and pour money into developing the next big thing.
There is already some resistance, however. TSMC Founder Morris Chang, the godfather of the island’s semiconductor industry who retired in 2018, warned that government efforts to bring chipmaking onshore could push up costs and slow technological advancements.
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