Can the US and Europe compete in semiconductor manufacturing?

Bill Gurley and Brad Gerstner discuss what makes a successful semiconductor fab in B2G’s latest podcast episode and bring up a talk that Morris Chang, TSMC founder, gave in October 2023 at MIT.

In his talk below, Morris Chang points out that TSMC is competitive partly because of Taiwan’s labor laws and cultural norms, the type of work people are willing to do, and TSMC’s ability to retain them without significant churn. If people don’t stay at a job long enough, they won’t become skilled enough to be able to manufacture semiconductors at the high level that TSMC does. The working conditions that Chang mentions include working long hours and living in dormitories.

If anyone, Morris Chang should know what made TSMC the one fab in the world that everybody looks to for manufacturing their most advanced chips, including Nvidia.

This casts doubt on the recent efforts by the US and Europe to try to recreate TSMC-like manufacturing capability on their soil as Taiwan’s geopolitical situation becomes ever more uncertain. Taiwan sits in major geopolitical crosshairs as Xi Jinping has expressed a desire to see Taiwan reunified with mainland China while, at the same time, China and the US compete for the most advanced technology that powers the future of AI.

Chang says that when Taiwan loses chip manufacturing, it won’t be to the US or to Europe but instead to India, Vietnam, or Indonesia. In so many words, Chang is pointing out that with American and European labor laws and cultural norms, we can’t recreate a world-leading chip manufacturer like TSMC.

Now that a new Cold War is being waged between the US and China, and AI has become one of the most critical battlegrounds, Chang’s point could not have much larger ramifications. If there is any doubt, we can already look at where Apple is moving its manufacturing as it’s leaving China due to geopolitical reasons. It’s not to the US, where they design their hardware, but to India and Taiwan.