GlobalFoundries threatens to sue TSMC for German subsidies

According to the report, Sam Azar, the legal director of the American wafer foundry, Gexin Company, said in an interview with Der Spiegel magazine in Germany: "TSMC has a scale more than 10 times that of Gexin. Now it plans to produce chips next to its main customers, compete directly with Gexin, and receive huge subsidies. Is this fair and appropriate

Azar criticized Germany's subsidies to TSMC as "feeding the largest tiger with steroids".

EU Chip Act

The semiconductor industry, which is the cornerstone of modern technology, is undergoing a controversial debate in Europe.

According to the EU chip law, Taiwan Semiconductor Manufacturing Corporation (TSMC), the leader of the global chip manufacturing industry, will receive huge subsidies from the German government to build factories in Germany.

Although this move is hailed as an important step in driving semiconductor production in Europe, it has raised concerns and dissatisfaction among competitors, especially Global Foundries (GF).

The latter raised objections based on TSMC's unfairness and potential market dominance, sparking discussions about competition, subsidies, and the future of the industry.

TSMC-GF Dispute

TSMC has decided to build a factory in Germany, thanks to the German government's commitment of 5 billion euros in subsidies, making its market dominance and potential impact a focus of attention.

Global Foundries (GF) is an important player in the industry and strongly reserves the level of support received by TSMC, claiming that it disproportionately skews the competitive landscape of the European Union.

Saam Azar, the legal head of Global Foundries (GF), emphasized in an interview that TSMC's scale and subsidy level give it significant advantages.

TSMC entered the European market and positioned itself as producing chips near Global Foundries (GF)'s main customers, which is seen as a direct competitive move that may threaten Global Foundries (GF) market share.

This has sparked a debate on whether such subsidies are fair and appropriate in maintaining a fair competitive environment.

Earlier, Intel's CEO asserted that due to Intel's extensive research and development work in China, Intel should receive most of the funding from the US chip bill.

Unlike competitors such as TSMC and Samsung, Geithner emphasized that most of Intel's important research and development is conducted in the United States.

He believes that this difference ensures a larger share of funding, as it is more consistent with the original intention of the Chip Act - to promote domestic semiconductor innovation and capabilities.

Competition between TSMC and Grid Core (GF)

TSMC and Global Foundries (GF) are two leading contract chip manufacturers in the world. TSMC is a market leader with a 54% share in the global OEM market in 2022. Gexin is the second largest foundry with a 10% share.

The competition between TSMC and Grid Core (GF) is very fierce and is likely to continue in the coming years. Compared to Grid Core (GF), TSMC has many advantages, including its leading technology, large customer base, and financial strength. However, GF is investing to catch up with TSMC, and the two companies may eventually become more evenly matched.

The following are some key areas of competition between TSMC and Grid Core (GF):

1. Technology: TSMC is a leader in semiconductor manufacturing technology. It provides a wider range of process nodes than GF and is also the first to introduce new nodes.

This gives TSMC a significant advantage in attracting new customers and retaining existing ones.

2. Customer base: TSMC's customer base is much larger than that of Grid Core (GF). This is because TSMC is the preferred foundry for many world leading semiconductor companies, including Apple, Qualcomm, and NVIDIA.

3. Financial strength: TSMC's financial strength is much stronger than that of Gexin (GF). This is because TSMC has been profitable for many years, while Grid Core (GF) has been struggling financially.

TSMC's financial strength provides resources for its investment in new technologies and expansion of production capacity.

Despite TSMC's advantages, Grid Core (GF) is still investing in catching up. GF is building a new wafer factory in New York and is also investing in new technologies.

Grid Core (GF) may eventually be on par with TSMC, but this may take several years.

The competition between TSMC and Grid Core (GF) is crucial for the global semiconductor industry. These two companies are competing to provide customers with the best possible technology.

This competition is driving innovation and helping to maintain the competitiveness of the semiconductor industry.

Subsidies as catalysts for market dominance

Tom Caulfield, CEO of Grid Semiconductor (GF), and others within the company expressed concerns about TSMC's potential dominance in the semiconductor market driven by these huge subsidies.

The metaphor of 'feeding the largest tiger with steroids' depicts how this financial support disproportionately empowers TSMC, enabling it to further strengthen its control over the industry.

Worryingly, this may lead to market imbalance, limited competition, excessive reliance on a single supplier, and ultimately hinder innovation and growth.

Grid Core (GF) Seeks Fairness and Competition

The opposition of Grid Core (GF) and the threat of filing complaints with the European Union (EU) stem from their desire for fair and competitive markets.

The company argues that if TSMC's factory construction receives nearly 50% subsidy, similar support should be extended to its competitors.

This demand for a fair competitive environment reflects the necessity of ensuring that subsidies do not unintentionally create a distorted competitive landscape, stifling innovation and diversity.

Driving the Future

This situation has raised questions about how governments, regulatory agencies, and industry participants can strike a balance between incentivizing semiconductor production and avoiding market concentration.

Subsidies can undoubtedly play a crucial role in promoting local manufacturing and technological progress.

However, careful consideration is needed to ensure that these subsidies do not unintentionally undermine competition and lead to unexpected market dominance.

conclusion

The controversy over subsidies and potential market dominance in TSMC-GF symbolizes the broader challenges faced by the semiconductor industry and governments around the world.

Achieving a balance between supporting technological progress and maintaining a competitive landscape is a delicate task.

The outcome of this debate will not only affect the European semiconductor market, but also set a precedent for how countries can handle subsidies and competition in key industries.

As the world increasingly relies on technology, finding fair and sustainable solutions is crucial for promoting innovation, growth, and healthy competition.