Will China run out the clock on Xilinx deal?

https://www.fool.com/investing/2022/01/20/whats-going-on-wit…

man, I’m tired of waiting.

I suspect that China wants a bribe. Not an illegal one, even if it happened in the US. As a guess, what if AMD was to license the I/O dice for China to manufacture, while AMD would supply the Zen chiplets. This would allow the Chinese to manufacture a number of systems each year with their replacements for the encryption algorithms. I won’t say done right, because I know enough about crypto to know that what the Chinese government wants can never be secure, even if you count the Chinese eavesdroppers as legitimate recipients.

That is just a random guess, but I suspect that the China negotiators have let AMD know what they want, and AMD is negotiating to manage the least long-term damage from the accommodation. If AMD can’t find something they can live with? They will walk away. But since the negotiators on the Chinese side will get nothing if the deal fails, it is in their personal interest, if not China’s national interest for the deal to complete.

If China refuse to approve the Xilinx takeover, could AMD walk away from China? I know China helped AMD when AMD was a little desperate from 2015 on, at least according to this https://www.wsj.com/articles/u-s-tried-to-stop-china-acquiri…

China is a little different now, there is widespread internment for Uighurs, China has broken the treaty with the UK over Hong Kong and is threatening Taiwan with invasion. If an invasion happens that’s possibly the end of TSMC and it’s supply to AMD. In my view when Xbox’s are unavailable from Amazon (demand exceeds supply), where is the upside in continuing to do business with China?

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Realistically, AMD can’t cross China while it needs wafers from TSMC. AMD’s business is building semiconductor chips, not starting wars. Is TSMC working toward the point where it can split the company, and sell off the assets in China. Does TSMC want to do that? No, for the same reason that AMD won’t cross China on the Xilinx acquisition. Both companies want to do business, not start trade or shooting wars.

Having said that, by 2025 TSMC should be able to supply its key American customers: Apple, AMD, nVidia, and perhaps Tesla and Intel from fabs in the US.

Let me see if I can draw that picture better. Every time the price of semiconductor transistors drops by half, the demand goes up fourfold. There are three or four generations of unfilled demand out there. It is not as visible in the US, but look at Elon Musk’s Starlink. For currently $99/month you can get fast, reliable internet service basically anywhere except the Arctic and Antarctic. You may think that that is a high price, but there are millions of villages out there which don’t even have telephone service. (Don’t have adequate power? Tesla has you covered, but you can also check out low-pressure hydro.)

In the first world, everyone who wants one has a smartphone. In a couple of decades as semiconductor prices continue to drop, this will be extended to the rest of the world. In the meantime, one satellite link supporting a dozen computers in the local school is a dream that is rapidly getting filled, at least where the central government allows it. Elsewhere, there are philanthropists and philanthropic organizations that will set it up. (Yes, the bottleneck is finding computer literate people to support the systems and help the local people learn to use them.)

Elsewhere? We are beyond every new car having a built-in map utility. In older cars, people use their smartphones or buy a Garmin.* Soon I expect the thing for Christmas will be a car replica without wheels that kids can put in their room, and it will train them for real driving. Of course, by then most cars will be self-driving, and many may not even provide for manual driving.

This has been a sort of rant just to point out that the semiconductor industry is going to continue to expand rapidly. Will the output of semiconductors match demand any time in this decade? Unlikely.

  • I don’t own one, never have. So this is not an endorsement. Incidentally, their current main product is wristwatches.
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Stephen,

China is a little different now, there is widespread internment for Uighurs, China has broken the treaty with the UK over Hong Kong and is threatening Taiwan with invasion.

This has always been the agenda of the Chinese Communist Party (CCP). The language has become somewhat more explicit in recent years, but the CCP never concealed its agenda of “repatriatio of wayward provinces” including Hong Kong, Macau, and Taiwan.

If an invasion happens that’s possibly the end of TSMC and it’s supply to AMD. In my view when Xbox’s are unavailable from Amazon (demand exceeds supply), where is the upside in continuing to do business with China?

Truth is, we made a mistake in allowing ourselves to become progressively more dependent upon the Peoples’ Republic of China (PRC) for most of the past four or five decades. It’s going to take some time to extricate ourselves completely from that dependence because it takes time to build factories and to establish domestic suppliers – IOW, to rebuild our own industrial base.

Of course, we all have 20/20 hindsight. The mistakes of our past become obvious when they bite us in the butt.


The real nightmare scenario facing our country right now is the spectre of coordination between Moscow and Beijing whereby Russia invades Ukraine and the PRC invades Taiwan more or less simultaneously. Our nation abandoned the “two major wars” level of military and naval preparedness back under the guise of the “peace dividend” back in the 1990’s, so we no longer have the forces that we need to deal with that scenario. Unfortunately, a war is not always our choice.

And I’m also not convinced that we are prepared to wage an economic war. The present administration has shut down our domestic production of oil and gas, making us again dependent upon imports, after the last administration made us a major energy exporter, and many of our NATO allies are now dependent upon Russia – our adversary – as a major supplier of their petroleum and natural gas. That gives Russia a major economic lever with respect to Ukraine.

Norm.

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The present administration has shut down our domestic production of oil and gas, making us again dependent upon imports, after the last administration made us a major energy exporter

Neither administration has/had the ability to affect oil production that much.

Oil prices (being low in 2020 due to Covid) have resulted in companies stopping production and therefore decreased production overall.

As prices have gone back up we will likely see production increase again.

While I don’t agree with the current administration’s energy policies, their policies, and the previous administration’s policies have not “made us a major energy exporter” nor made us not be one. If you think they have, I’d guess you’re listening to partisan rhetoric, rather than looking at what they’ve actually done and how our exports have changed over the past 10 years.

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Realistically, AMD can’t cross China while it needs wafers from TSMC. AMD’s business is building semiconductor chips, not starting wars. Is TSMC working toward the point where it can split the company, and sell off the assets in China. Does TSMC want to do that? No, for the same reason that AMD won’t cross China on the Xilinx acquisition. Both companies want to do business, not start trade or shooting wars.</>

I don’t imagine this would start a war but if China refuses the merger/acquisition, AMD could legitimately say the merger is more important and if that impacts China business then so be it, surely? I don’t know how to find the information to size China’s business with AMD so am not in possession of all the facts however. It seems a little crazy for any company to surrender acquisition policy to China.

foo1bar,

Neither administration has/had the ability to affect oil production that much.

Try again. The administration controls permitting for drilling, fracking, pipelines, etc., and, to some extent, through regulation of interstate and international commerce. The administration might not control how much petroleum or natural gas is taken from a well, but they sure can control the ability to drill the well and to build the distribution network.

Oil prices (being low in 2020 due to Covid) have resulted in companies stopping production and therefore decreased production overall.

As prices have gone back up we will likely see production increase again.

That’s true to some extent, but reopening a well or a pipeline may require a federal permit.

Norm.

That’s true to some extent, but reopening a well or a pipeline may require a federal permit.
Can you point to an example of a company letting a permit lapse that they’d likely want to reinstate in a year or two when oil prices go back up?

“Neither administration has/had the ability to affect oil production that much.”

Try again. The administration controls permitting for drilling, fracking, pipelines, etc., and, to some extent, through regulation of interstate and international commerce. The administration might not control how much petroleum or natural gas is taken from a well, but they sure can control the ability to drill the well and to build the distribution network.

They do have some control over permitting, etc.
Show me evidence that the control either administration has exerted has affected oil production significantly.
I do not see any evidence that one administration “made us a major energy exporter” - nor evidence to your implication that the current administration made USA not be one (and accomplished that in less than a year).
Statements by politicians at campaign events are IMO not evidence - especially when journalists try to corroborate those statements, and find they aren’t supported by the data.

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It’s good to start with some data: https://www.eia.gov/tools/faqs/faq.php?id=727&t=6#:~:tex…. Read the whole thing, and look at some of the additional pages if you really care, as opposed to trash-talking politics.

The important bottom line: The US was a net exporter of 0.63 MMb/d in 2020. There are some complex cross-border flows to Mexico and Canada, where minimizing the miles that the oil (and natural gas) flows, results in Canada and Mexico both importing oil from and exporting oil to the US. On a year-to-year basis do these match? No. Wah! In the long-term, these balance out.

The real, huge change that turned the US back into a net oil exporter was the Trump administration abolishing a rule that prevented natural gas exports. If you dig a bit deeper into the numbers you will see that the US is a net importer of oil and a net exporter of gas, 2.67 MMb/d of net crude oil imports in 2020. Why is the US a major exporter of natural gas? Fracking. If you have been taught that fracking is evil, check on the regulations in your state. I believe that New York does not allow fracking. Pennsylvania produces huge amounts of natural gas without any serious problems. How? Pennsylvania has been an oil (and coal) exporter for centuries. They know everything that can go wrong and have an active and effective regulatory system. (If you take the PA Turnpike Northeast Extension you can see the results of not regulating coal production a century ago.*

  • What regulations are needed for fracking? The most important issue is the disposal of brine. Fracking requires piping almost drinking quality water into the hole (the major additive is some sand). As the well produces all that water comes back up, but pretty much ocean water now. (The oil and gas remember used to be vegetation in an ocean.)

Again, a little bit of thinking. That brine is saturated with a lot of different minerals. It can be used as–and is used as–a source for magnesium, boron, etc. All the regulatory agency has to do is make sure that the brine is sold, instead of stuck down a dry hole.

The real, huge change that turned the US back into a net oil exporter was the Trump administration abolishing a rule that prevented natural gas exports.

What rule is that?

The US has been exporting natural gas for decades.

I think with fracking, there has been significantly more production, so more has been exported.

You can see the increase in exports for natural gas started in 2015.
https://www.eia.gov/energyexplained/natural-gas/imports-and-…

Does that mean Obama should get “credit” for the increase in natural gas exports? I don’t think so.

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Does that mean Obama should get “credit” for the increase in natural gas exports? I don’t think so.

No, it means you ignored what I said about imports and exports to Canada and Mexico. For example, the Texas refineries shipped “feedstocks” to Mexico that were based on natural gas. There was also a period where natural gas from the North Sea was shipped to Boston, and to a terminal in New Hampshire. This was matched by LNG exports from Washington state to Japan. (I don’t know if it is still going on, but I doubt it.)

Economists have a word, fungible, for goods that are interchangeable. Oil is probably the most fungible commodity around. An oil tanker’s cargo may be sold a dozen or more times while the ship is at sea. As you can imagine, oil or gas moving through a pipeline is even more fungible.

“Does that mean Obama should get “credit” for the increase in natural gas exports? I don’t think so.”

No, it means you ignored what I said about imports and exports to Canada and Mexico.

So, you think Obama should get credit for the increase in natural gas exports?
I disagree.
But feel free to provide evidence to show how his administration should get credit for it.

I notice that you did not answer what rule Trump changed that was preventing export of natural gas.
Instead, you tried to change the subject. So I would conclude that there was not a rule he changed that was preventing natural gas export.

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Having said that, by 2025 TSMC should be able to supply its key American customers: Apple, AMD, nVidia, and perhaps Tesla and Intel from fabs in the US.

Source? I’ve only heard about one TSMC fab under construction.

So, you think Obama should get credit for the increase in natural gas exports?
I disagree.
But feel free to provide evidence to show how his administration should get credit for it.

I notice that you did not answer what rule Trump changed that was preventing export of natural gas.
Instead, you tried to change the subject. So I would conclude that there was not a rule he changed that was preventing natural gas export.

I should probably ignore this, but I will assume that my previous post was not clear. The net imports and exports of natural gas to Mexico and Canada are by treaty zero. (There are net imports of heavy crude oil from Canada, but that is not what we are discussing here.) Also, Canada and Mexico are partners in the USMCA which replaced NAFTA in 2020. But for this discussion, you can ignore that as well. If the US imports natural gas from Canada on the West Coast, and exports the same amount in the East, the net is zero, even though it is recorded separately as imports and exports.

The level of those imports and exports changes drastically from month to month, less substantially from year to year. So even though (by treaty prior to 2020) the net gas exports to Canada were zero or less, there would be days when (due to the weather in the East) there would be net millions of barrels of oil per day equivalent moving into Ontario. In effect, Canadian gas was moving East through the same pipelines that were carrying US gas West. Due to the fungibility* of natural gas, it is much less expensive to do swaps that eliminate that overhead.

You can either 1) do all this due diligence for yourself 2) subscribe to a decent oil and gas newsletter or 3) look at the net numbers. I’m not going to describe the fourth option. :wink:

  • Which is why I explained fungibility. I try not to assume that readers here are not familiar with basic economist speak.

Source? I’ve only heard about one TSMC fab under construction.

Old news you may have missed:

https://www.nextbigfuture.com/2021/05/tsmc-arizona-fab-plans…

In part, I am just guessing at what TSMC’s 2025 capacity in Arizona will be. I expect the first fab to be fully functional, and two more to be in the process of ramping up in 2025. The money has been budgeted (and the land bought) for two more fabs in Arizona. TSMC’s internal plans for whether to complete these serially or in parallel are not known. Expect them to start building addition fabs on the site even before these are fully operational.

Didn’t I just post about the effect of a 50% price drop in servers is to increase the demand by 300%? Whether the number is three times, six times, or somewhere in between is effectively a detail. The demand for more semiconductors will be satisfied by new fabs. TSMC is building several, so is Intel (in Arizona and Ohio). Samsung has one fab project in Texas, which is about 1.5 times the size of TSMC’s first Arizona fab. Are there other fab construction plans that I am unaware of?

Oops! I’m going to blame this one on the spell-checker getting the context wrong: “… start building addition fabs…” should read “… start building additional fabs…”

Sometimes I leave minor corrections alone. This one might have some people wondering what an addition fab was.

In part, I am just guessing at what TSMC’s 2025 capacity in Arizona will be.

Per your link, only the 20,000 WSPM fab is under construction. There are rumors for 100k total, but nothing has been started or announced yet. Even at 100k, that’s not enough for just Apple. I’m still waiting for a real announcement from TSMC.

I feel that TSMC wants to get the US to pay for some of the buildout. The CHIPS legislation and FAB Act both provide funds and tax credits for fabs built in the US.

Per your link, only the 20,000 WSPM fab is under construction. There are rumors for 100k total, but nothing has been started or announced yet. Even at 100k, that’s not enough for just Apple. I’m still waiting for a real announcement from TSMC.

The original announcement was for a $12 billion single fab. TSMC then budgeted (long term) $35 billion to be distributed over three fabs. As I said, I had no clue as to whether they would build the additional fabs in parallel or serially. As far as the construction is concerned it makes sense to reuse trained workers (and contractors) for the physical plant. Probably also for the wafer handling system(s). The ASML scanners will be installed on ASML’s schedule. The rest of the fab equipment? That’s the no clue part. But expect all that money to be spent by the end of 2025, even if they are waiting for delivery of some equipment. (Almost surely scanners again.)

Hmmm. From: https://inf.news/en/digital/cf6f7419d24656dae46f675674564e39… A few days ago, news came from Korean media thelec. ASML CEO Peter Wenning announced that the production of ASML EUV equipment will be expanded to 55 units in 2022, and will increase to 60 units by 2023.

At the same time, ASML’s EUV equipment delivery time will also be shortened, from the original 18 months to 12 months to 18 months.

So, in theory, all of TSMC’s scanners will arrive by the end of 2023. At least the ones we know were ordered in May 2021. I’m sure that ASML will take orders for scanners not yet offered for buildings not yet built. They have been doing that for decades. I don’t know what mix of scanners TSMC has ordered. (Sometimes that is announced.) But it probably isn’t worth tracking down, as, based on experience, the models delivered will not be those originally ordered. With an 18 month backlog, it is almost a given that there will be new models available that ASML will let TSMC or whoever change their orders before they get to the front of the queue.

TSMC then budgeted (long term) $35 billion to be distributed over three fabs

Even it this turns out to be true, it’s only 100k WSPM. That’s nothing for TSMC. AMD is likely running >60k WSPM now at TSMC. Apple is some 5x larger in TSMC revenue. There is no way all these chips could be fabbed at this AZ location.

Here’s one report of AMD securing 20k WSPM just for high end GPUs.
https://www.hardwaretimes.com/amd-reportedly-orders-20000-5n…

And here is the breakdown of TSMC’s biggest customers.
https://www.tomshardware.com/news/amd-becomes-tsmc-third-lar…