"The Intersection of Chips and China: Lessons for Building a Semiconductor Industry"

"The Intersection of Chips and China: Lessons for Building a Semiconductor Industry"

Introduction:

The rapid advancement of technology has made the semiconductor industry a crucial player in global economies. As China aims to establish its own semiconductor industry, it not only needs to recreate key players like TSMC, but also various components of the foundry supply chain. This article explores the implications of China's integrated approach, draws parallels to Intel's success, highlights the vulnerabilities of the U.S. in semiconductors, and raises concerns for Taiwan.

The Integrated Approach: Intel vs TSMC

Intel's integrated approach, where chip design and manufacturing were tightly integrated, allowed the company to dictate the terms and optimize the chips for its manufacturing processes. This approach extended beyond designs to include tooling and other components. In contrast, TSMC's modular approach emphasizes specialization, allowing companies to focus on chip design while outsourcing manufacturing. China's journey to building its own semiconductor industry can benefit from understanding the integration point's critical role in Intel's success.

The Expensive Fabs vs Cheap Chips Dilemma

Fabs, the facilities where semiconductors are manufactured, come with massive fixed costs, making them expensive to build. On the other hand, chips themselves are relatively cheap to produce. This economic contrast is similar to the software industry, where venture capital support helped chip companies like Intel before transitioning to software. China must navigate this dynamic and invest in the learning curve of both the foundry and equipment levels to establish a competitive semiconductor industry.

The Devastating Nature of Disruption

Disruption, although difficult to avoid, can be highly damaging if not managed properly. Managers often focus on leveraging their advantages and increasing margins, rather than destroying their existing systems. However, the semiconductor industry requires adaptation and innovation to stay relevant. China must be prepared to disrupt its own systems, overcome resistance to change, and embrace new technologies to succeed in building its semiconductor industry.

Lessons for Product Managers from Product Marketing

Product management and product marketing are two critical functions that complement each other. While product management focuses on deciding what to build and why, product marketing concentrates on effectively communicating the value of the product to potential customers. Amazon's one-page PRD, written as a press release, helps shift the thinking from internal implications to a customer's perspective. Product managers can benefit from adopting this customer-centric approach to align their strategies with market demands.

Actionable Advice:

• 1. Embrace Disruption: To stay ahead in the semiconductor industry, both China and established players must be willing to disrupt their own systems, challenge existing norms, and push the boundaries of innovation.

• 2. Invest in Learning: Building a semiconductor industry requires moving down the learning curve on both the foundry and equipment level. China should prioritize investment in research, development, and education to develop the necessary expertise.

• 3. Foster Collaboration: China must recognize that the global supply chain for semiconductors extends beyond its borders. Collaborating with international players, such as Zeiss, TRUMPF, and Access Laser, can help bridge the gap and accelerate its progress in building a competitive semiconductor industry.

Conclusion:

The journey to building a successful semiconductor industry is a complex and multifaceted endeavor. By learning from Intel's integrated approach, understanding the dynamics of fab construction and chip production, and embracing disruption, China can position itself as a formidable player in the global semiconductor market. However, collaboration and investment in learning will be crucial factors in achieving this goal. As the world witnesses the evolution of the semiconductor landscape, it is essential for all stakeholders to adapt and innovate to stay ahead in this rapidly changing industry.