TSMC’s US$40–50 Billion Annual Capital Spending Is Almost Beyond Intel’s Reach

Annual capital spending of US$40 billion or US$50 billion is almost beyond what Intel can afford. Intel forecast 2021 revenue of US$73.5 billion and a 57% gross margin, using its official non-GAAP guidance basis. TSMC’s hard-to-shake advantages: 1. Taiwan’s workforce is both excellent and inexpensive. 2. TSMC absorbs almost all engineering and science students from Taiwan’s top and middle-ranked universities, including NTU, Tsing Hua, Chiao Tung, Cheng Kung, Central, and Sun Yat-sen. 3. Taiwan’s abundant, inexpensive capital supports continued investment and expansion. 4. TSMC effectively embodies a national effort involving education, economic affairs, science and technology, finance, financial regulation, and local governments. America’s best talent may instead build software and startups in Silicon Valley rather than concentrate in semiconductors. Engineers cost more, and financing costs are likely higher. Together with differences in focus and business model, this makes competing with TSMC in foundry services increasingly difficult for Intel over time. China wants to support chipmakers but cannot obtain crucial extreme ultraviolet (EUV) lithography equipment under restrictions, creating a bottleneck below 28 nm. It can only hope for TSMC expansion in China and some transfer of mature processes. Samsung remains TSMC’s main competitor. Yet differences in focus and business model may still allow TSMC to maintain its lead.