TSMC’s chip challenge

This is an audio transcript of the FT News Briefing podcast episode: ‘TSMC’s chip challenge’

Jess Smith
Good morning for the Financial Times. Today is Monday, November 7th, and this is your FT News Briefing.

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The European Central Bank is clashing with one of Italy’s biggest lenders. Taiwan semiconductor maker TSMC isn’t just grappling with geopolitics, it’s got a technological challenge as well. Plus, we’ll look at how the US Supreme Court’s ruling on abortion could make corporate efforts to support women employees more complicated. I’m Jess Smith, in for Marc Filippino, and here’s the news you need to start your day.

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The European Central Bank is bracing for recession, and it’s taking a tougher stance towards lenders’ capital plans. It’s not happy with how much cash one of Italy’s biggest lenders, UniCredit, plans to pay out to shareholders. UniCredit said in a letter back to the ECB that it has enough capital and paying more to shareholders won’t significantly weaken its balance sheet. In addition to this point of tension, the European Central Bank is also upset that UniCredit hasn’t yet exited Russia. UniCredit is one of only two European banks still doing business in Russia. The ECB sees this as an unwelcome source of risk.

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The world’s leading semiconductor producer is Taiwan Semiconductor Manufacturing Company, or TSMC. It’s become dominant despite its location on an island smack in the middle of US-China military tensions, an island that lives under constant threat of China invading. And yet it continues to maintain a clear lead over its global rivals. Here’s the FT’s greater China correspondent Kathrin Hille.

Kathrin Hille
They surpassed Intel, I think, in 2017 or something for the most leading-edge production technology. Samsung tried to make a leap ahead of them but so far hasn’t succeeded. So they are conservative, but like very down to earth. And I mean, manufacturing is just what they do. So they’re single-mindedly focused on that.

Jess Smith
Kathrin says geopolitics are a major concern for the company, especially as the US and other countries consider bringing chip production back home. But the other big challenge has more to do with physics.

Kathrin Hille
It’s about how small the transistors can be made.

Jess Smith
Transistors are the tiny switches that regulate the flow of electrical voltage on a chip, and it’s getting harder and harder to shrink them further, to pack more on to the silicon chip and deliver more computing power.

Kathrin Hille
This is not something that’s suddenly emerged. It’s something that’s been under way for quite some time. And chipmakers, not just TSMC, also others, have been experimenting with lots of ways of meeting that challenge or getting around it. But the challenge is getting bigger. And so this is the moment where many senior executives at chip manufacturers have been saying transistors may not be the only solution anymore. So what’s happening is that apart from making transistors smaller, they’ve also started changing the architecture of the chips in other ways about things that they used to put next to each other. In a plainer design, they have started stacking on top of each other and then things that were in different separate chips, they’re trying to put closer to one another. They’re also actually boring holes through the silicon and laying some of the connections through it and putting them on the back side of the silicon chip.

Jess Smith
So going back to TSMC’s key challenge, what is the ultimate goal?

Kathrin Hille
Well, from the beginning of the semiconductor industry, the goal has been a combination of speed and power consumption to increase computing power. So Gordon Moore, the co-founder of Fairchild Semiconductor and Intel several decades ago, he discovered that actually you could increase computing power by a certain amount in a set time and he then envisioned that that would allow the industry to push towards devices that at the time just seemed like science fiction or a dream like personal mobile phones or things like that have become a fixture in our lives now. The way forward, of course, is now we’re looking at things like artificial intelligence and supercomputers, but also data centres that perform all these computing operations that then allow things like weather forecasting and weapons systems to run. Of course, electric vehicles and self-driving vehicles is a big growing market. And so now that means the industry has to deliver an ever fast-growing amount of computing power, but at the same time a reduction in power consumption. So even if the chip manufacturers cannot deliver the same amount of performance gain, it would also be a huge progress for them or that they can offer the customers, if only they can get the power consumption down for the same amount of computing performance.

Jess Smith
Kathrin, after you did all the reporting for this story, after you delved into the guts of chip manufacturing and all the challenges that TSMC faces, what struck you the most?

Kathrin Hille
I found most fascinating that even the people who have been at this for a long, long time, that they really they keep exploring. When they started, they were maybe some of them were electrical engineers. And now they have to start looking at material science and some of it has to do with chemicals. And I found this really mind boggling that they can keep innovating at that kind of speed and really explore these new fields that maybe some of them were not really educated to do. These companies are capable of finding that innovation potential in entirely new fields.

Jess Smith
Kathrin Hille is the FT’s greater China correspondent. Thanks, Kathrin.

Kathrin Hille
Thank you too.

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Jess Smith
Many US corporations have been working to make their workplaces more friendly for women. Better parental leave, nursing rooms, accommodations for symptoms of menopause, for example. But this year, when the US Supreme Court overturned the right to abortion leaving it up to the states, big companies like Amazon and Citigroup said they’d help employees travel to another state if they needed an abortion. The FT’s Brooke Masters says this is actually a much more complicated matter.

Brooke Masters
This is a serious can of worms. This is probably the single most divisive issue in America right now.

Jess Smith
Brooke is our US investments and industries editor. She joined me to talk more about this. And we should remind listeners outside the US that employee health is an issue for companies here because many Americans get their health insurance through their company.

Brooke Masters
And the reason companies feel they need to speak about it is those that depend on an educated workforce and have trouble recruiting people are under pressure from their employees, particularly their female employees, but also sort of men who care about women’s rights to support women and make sure that they are given access to a health procedure that is legal in most states.

Jess Smith
So why does the abortion issue make it more complicated for companies to address their women employees’ health needs?

Brooke Masters
It makes it more complicated because the employer has to choose what is covered. And even though in general insurance is handled externally, like, you file your claims directly to the insurance company. It’s not clear to me how confidential those records really are. And in the travel expenses, you know, helping pay to bring someone from Texas to New York so they can get an abortion, because those are the kinds of states that are involved, that is probably almost certainly handled directly by the employer or through some third-party service that the employer has some say over. So there’s absolutely every reason to believe that it’s not particularly private.

Jess Smith
And what does the Supreme Court ruling on abortion mean for women employees? I mean, say if they need time off to go out of state?

Brooke Masters
In theory, this is a health issue and it should be confidential. The reality is, anyone who’s ever, you know, worked in a big, nosy workplace knows that if you, you know, tell somebody you’ve got breast cancer, it gets out. I assume this will get out, too. And given that abortion in some people’s mind is associated with things like casual sex or carelessness, it can’t be the easiest thing as an employee to ‘fess up to this. I mean, think maybe five, ten years ago, people didn’t even want to admit to taking antidepressants for fear that that would affect their bosses’ views of them. This is definitely gonna be controversial because, you know, bunches of Americans think this is a mortal sin and they really look down on people. I think if you are a woman who is in need of an abortion and are gonna have to go out of state, I would think very, very hard about whether you really want that financial help from your employer.

Jess Smith
But in the end, I mean, despite these complications, aren’t the companies we’re talking about, aren’t they just trying to be more supportive of their women employees?

Brooke Masters
I think many employers view it as that, it’s part of a larger campaign to make their workplaces more attractive to female employees and also cut down on the big drop-off in middle market because there is a huge drop-off in the ages of child rearing. And for companies that have come out and said they will support women, you see it particularly in things like tech and finance. You see efforts to address things like menopause and IVF and the kinds of things that make it possible for people to stay in the workplace. So it is, yeah, it’s part of, it’s definitely part of a larger effort to be friendlier. And if ultimately abortion gets made less controversial and part of just this general making the workplace more inclusive, that would bring down the temperature and make it easier for employees to seek help if they need it.

Jess Smith
Brooke Masters is the FT’s US investments and industries editor. Thanks, Brooke.

Brooke Masters
Thanks for having me.

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Jess Smith
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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