Two little-known companies have become so crucial to the chip-manufacturing industry — and industries further afield, including defence — that they have found themselves at the centre of global geopolitical tensions.
Yet unless you’re in the field of technology there’s every chance you’ve never heard of either firm. At best, most people who do know about them don’t have a clear picture of their overriding importance to the global economy. Yet without them the world would take a technological leap backwards.
The companies are Taiwan’s TSMC and the Netherlands’ ASML Holding. Together they lead in cutting-edge semiconductor manufacturing, making some of the most advanced technologies ever dreamt up by human beings.
TSMC — short for Taiwan Semiconductor Manufacturing Co — has overtaken chip industry stalwart Intel to build chips with such extreme levels of miniaturisation and precision that a decade ago it wasn’t clear whether it was even technically possible to achieve this at scale.
And ASML — which was originally an abbreviation of Advanced Semiconductor Materials Lithography — makes the super-advanced (and eye-wateringly expensive) machines that TSMC buys to populate its vast fabrication plants to manufacture many of the most advanced chips that power modern smartphones and high-end computers.
Where Intel, a US company, used to dominate the chip-manufacturing industry — earning the moniker “Chipzilla” as a result — it is TSMC that today is at the cutting edge. The Taiwanese firm, a chip “foundry” founded in 1987 to manufacture chips for other companies, has become the partner of choice for industry giants: Apple, for which TSMC makes chips for iPhones, iPads and more recently Macs; Nvidia (computer graphics and other chips); and long-time Intel rival AMD (graphics chips and computer processors).
TSMC, which is listed in Taiwan and New York, is among the top 10 most valuable companies in the world. With a market capitalisation of $472bn, it’s worth more than oil major ExxonMobil and four times (!) as much as Intel, the one-time silicon king.
ASML is by far the world’s largest supplier to the semiconductor industry of advanced chip-making machines, and the only one that builds the “extreme ultraviolet lithography” (EUV) machines sought by TSMC and others to build high-end chips. Worth $275bn, ASML is placed 30th worldwide by market cap — and is likely to keep rising up the valuation ranking.
EUV is cutting-edge technology in every sense. ASML’s most advanced, room-sized machines — which cost about $400m each — use extremely high-frequency wavelengths (close to the X-ray range) to pattern the finest lines on microchips and to create highly complex foundation layers of the most advanced chips.
The technology allows companies like TSMC to ensure that Moore’s Law still holds true despite the parabolic rate of change it implies. Moore’s Law is the famous observation made by Intel co-founder Gordon Moore in 1965 that the number of transistors in an integrated circuit doubles roughly every year (revised in 1975 to every 24 months).
Moore’s Law is the reason we have laptop computers today that can render 4K video without breaking a sweat; why we can build self-driving cars; and why modern computer games like Microsoft Flight Simulator have become photorealistic. If Moore’s Law holds true for another half a century, it will usher in immense technological advances that are as difficult to imagine today as the iPhone would have been to someone in the mid-1960s.
When Moore revised his law in the mid-1970s, Intel’s most advanced chips were made using an 8-micron (8,000-nanometre, or nm) manufacturing node. This is a measure of transistor density, or, put crudely, the space between the tiny circuits printed on the chip.
Today, TMSC is moving volume manufacturing to a 3nm node, meaning a transistor density that is almost 3,000 times greater than it was when Moore revised his law. And the company has a clear road map to get to 2nm (expect volume production by late 2025) and to 1.4nm (in 2028). For perspective, the average human hair is 80,000nm-100,000nm thick. That we can build chips at commercial scale in these incredibly tiny sizes is truly one of humanity’s greatest achievements.
Politicians, unfortunately, have also started to take note of the industry’s importance. In the US’s escalating rivalry with China, the Joe Biden administration has doubled down on efforts, begun under Donald Trump’s presidency, to neuter China’s technological advances.
In a series of increasingly hostile measures that started with the crackdown on Huawei Technologies, the US has tried to bar China from getting access to advanced chip-making technology from a range of companies, including ASML.
The sanctions, often imposed under the guise of national security, pose a direct threat to China’s ambitions to be a global superpower. President Xi Jinping, fully aware of this, is championing the development of advanced semiconductor technologies at home.
The problem is that no Chinese tech company is anywhere close to reaching the advanced manufacturing techniques pioneered by companies such as ASML and TSMC.
If Xi ever does launch an invasion of Taiwan — an unlikely prospect for now, thankfully — you can be sure that getting its hands on TSMC’s chip-making expertise will be one of China’s key strategic imperatives.
McLeod is editor of TechCentral