Intel Corporation CEO Pat Gelsinger recently left Taiwan after a brief visit that did not even last 48 hours. Because he had previously criticized the Taiwan Semiconductor Manufacturing Co. and Taiwan, many in Taiwan were suspicious about or indifferent to his visit. Wang Mei-hua, the minister of economic affairs, refused to meet with him. During his visit, Gelsinger made no public remarks, but only released a prerecorded statement in which he said he was happy to return to Taiwan, and that Intel was looking forward to continuing development and working in Taiwan.
Since Gelsinger became CEO 10 months ago, he has vocally made it known that he wants to consolidate chip manufacturing in Taiwan, a risky strategy. When he asked Congress to pass a subsidy bill, he said American manufacturers should take priority over TSMC or Samsung, which have already committed to investing or building factories in the U.S. Unsurprisingly, this upset TSMC as well as Taiwanese authorities, who regard TSMC as a national champion.
Gelsinger made this statement because he already had a new strategy planned when he became CEO at the beginning of the year: to catch up to rivals such as TSMC and Samsung before 2025 and reclaim dominance over wafer manufacturing. This plan includes setting up contract foundries in Europe and spending $20 billion in the U.S. to expand and build new factories. Intel may acquire the fourth largest global contract wafer manufacturer, Global Foundries, for $30 billion,an acquisition that would let Intel gain control of German, Singaporean and American foundries in one fell swoop. Additionally, Intel has poached high-ranking talent from Samsung and Micron Technology, and also changed to a new packaging system.
Intel has long dominated the semiconductor industry. Not only has it been a leader in technology, but it has set the standard for personal computers and servers. Even though it was eventually surpassed by TSMC in 7-nanometer technology, Intel has yet to be shaken from its position as leader in the fields of servers and PCs.
The advantage that Intel has and that means people dare not take Intel lightly is its support from the U.S. government, which is currently prioritizing the chip industry in the supply chain. Intel is not only a player and the referee, but it also has the home court advantage. With 30 years of experience at the company, Gelsinger formerly served as its chief technology officer and was named the top CEO in the U.S. His powerful return to Intel as CEO has been likened to when Morris Chang returned from retirement to retake control of TSMC.
Gelsinger’s primary aim at the moment is to obtain governmental subsidies from the U.S. and Europe. In addition to requesting $10 billion from European Union members, as well as funding to open new factories, he is waiting for Congress to pass a $52 billion bill that would fund research and manufacturing and inject money into opening new factories.
Paradoxically, while Intel must compete with TSMC for subsidies, it gives TSMC subcontracting work. While Intel still accounts for 80% of the global processor market, it has had a continual cooperative relationship with TSMC, to whom it contracts chip production. In his prerecorded video, Gelsinger specifically mentioned the long and deep relationship between Intel and TSMC.
Initially arrogant, Gelsinger’s attitude has switched to deferential, primarily because he wants to mend the rifts caused by his previous statements. He also confirmed the order for 3-nanometer processing, which Intel’s previous CEO, Bob Swan and TSCM previously agreed to and has assigned over 1,000 engineers to the project. Gelsinger’s recent visit to Taiwan was to dispel doubts and repair the relationship with TSCM. Intel is one of the few semiconductor companies that still designs and manufactures its own chips, although its current manufacturing process technology is stalled at 10 nanometers and it must rely on TSCM’s advanced manufacturing processes to produce new products.
There have always been cooperative yet competitive relationships within the electronics industry. The relationship with Intel is just that. In the past, chip and cellphone manufacturer Samsung has also had this kind of complex cooperative-competitive relationship with Apple. However, since the latter half of 2020, the U.S.-China trade war as well as the semiconductor chip shortage have led large countries around the globe to eagerly support their own semiconductor industries. And thus, “chip nationalism” was inevitable. The U.S. wants to become self-sufficient; Japan, the European Union and China have also declared the desire to be the same.
Within the Asia-Pacific Economic Cooperation, Chang recently suggested that if each country pursued its own self-sufficient supply chain, the results would be rather frightening. Although he said a supply chain based on free trade was the best approach, the trend toward self-sufficiency has already become unstoppable as the global supply chain undergoes waves of reorganization. This will be TSCM’s greatest concern, as well as Intel’s political advantage in the U.S. over the long run.
Still, Taiwan need not pay too much attention to Gelsinger’s negative influence. The important thing is for TSCM and Taiwanese industries related to chip manufacturing to continue to advance research and development and maintain and strengthen their place as market leaders so that no other industries can surpass them. This is Taiwan’s competitive advantage.