TSMC fabs leading node, and has consistently for several cycles now. So its margins probably benefit from a premium.
If Intel can make their foundry business work and keep parity with TSMC, the net effect is that margins for leading node compress from the increased competition.
> the net effect is that margins for leading node compress from the increased competition.
That is true in perfectly competetive markets, but I'm skeptical about that idea holding true for high-end chip nodes.
I'm not sure there is enough competition with Intel joining the market alongside TSMC, Samsung, and all the other (currently) minor players in the high-end space. You might see a cartel form instead of a competative market place, which is a setup where the higher margin is protected.
My best guess is the price will remain high, but the compression will happen around process yields. You could successfully argue that is the same as compressing margins, but then what happens after peak yield? Before prices compress, all the other compressable things must first squeeze.
> You might see a cartel form instead of a competative market place, which is a setup where the higher margin is protected.
Wouldn't it more likely be that players just carve out niches for themselves in the high-end space where they DON'T compete?
If you're Intel - it seems like a fools errand to spend $50B to maybe take some of TSMC's customers.
You'd probably rather spend $10B to create a new market - which although smaller - you can dominate, and might become a lot larger if you execute well.
I figured you'd see margin compression from the major, volume-limited buyers: e.g. Apple, Nvidia, etc.
Paying a premium to get a quota with TSMC looks different, if there's competitive capacity, at least for large customers who can afford to retask their design teams to target a different process.
Even if only as a credible stalking horse in pricing negotiations with TSMC.
They seem to be doing just fine.