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At a basic level, there are a few ways to make money in the world of microchips:
Intel built an empire doing the former, continuously outpacing rivals with leading-edge designs.
Fast forward to today, and 90%+ of state-of-the-art chips are made by TSMC, with the rest made by Samsung.
… and they’re willing to pony up the cash to do so. The firm just dropped $20B on 2 new fabs (fabrication plants).
The foundry strategy isn’t without challenges. Manufacturing chips has traditionally had low margins and requires massive scale to be successful.
But once a firm reaches that scale (like TSMC), it creates a virtuous cycle:
Intel’s fabs will take ~2 years to build, and experts believe it will take 3-5 years to gauge whether the strategy will work.
Notably, TSMC is an outlier, and its margins are boosted by government subsidies that are much higher than the US’s. Experts are still optimistic: The US needs computer chips, and global supply chain issues are proving it pays to have them domestically.
If Intel can be the one to supply them, it may just return to its glory days.