[News] TSMC’s Arm Investment Strategy: Elevating Customer Transition Costs

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According to a report by Taiwan’s Central News Agency, Arm, the semiconductor company, made its debut on the U.S. stock market with its stock price surging nearly 25% on the first day. Taiwan Semiconductor Manufacturing Company (TSMC) participated in Arm’s initial public offering (IPO), potentially yielding over 7 billion New Taiwan Dollars in returns. However, industry experts assert that TSMC’s primary focus is not on stock gains; rather, their strategic investment aims to elevate the cost and barriers for clients seeking to transition their semiconductor manufacturing to other foundries.

TSMC’s strategic investments are not unprecedented. In the past, TSMC collaborated with Intel and Samsung to jointly invest in ASML to facilitate the development of extreme ultraviolet (EUV) lithography equipment, enabling TSMC to advance to an enhanced 7-nanometer manufacturing process.

Arm has been a long-term partner of TSMC, with cumulative shipments of Arm architecture chips exceeding 250 billion units and commanding a market share of over 99% in the smartphone industry.

Industry analysts speculate that if TSMC and Arm strategically collaborate, offering integrated services that allow customers to utilize Arm’s IP-designed products in conjunction with TSMC’s process IP, it would enhance customer service and simultaneously increase the cost and barriers for customers looking to switch to other semiconductor foundries, thereby improving customer stickiness.

Currently, Arm’s applications span across cloud infrastructure, automotive, IoT, and artificial intelligence (AI), and industry experts contend that, apart from traditional CPU leaders like Intel, Arm provides the most comprehensive and robust semiconductor intellectual property (IP) design solutions for chip designers.

(Photo credit: TSMC)