Chips with gravy | Financial Times

While access to the latest and greatest semiconductor technology is becoming a geopolitical struggle, involving the US, China, Taiwan and South Korea, manufacturers are facing an immediate problem of how to get hold of more mundane chips that are essential to their businesses.

Taiwan’s TSMC and South Korea’s Samsung are powering ahead of America’s Intel in having moved down to the 5-nanometre node — a smaller size that can pack more transistors and power into the latest PC processors — but that’s a sledgehammer to crack a nut applied to chips tasked with simpler functions in cars and home appliances.

This is where the current shortages are being keenly felt, with multiple carmakers forced to halt production lines and even toaster makers suffering from the squeeze on supplies.

Kathrin Hille in Taipei and Song Jung-a in Seoul report this has led to a highly unusual deal being struck by the customers of United Microelectronics Corporation (UMC), the world’s fourth-largest contract chipmaker. They are providing financial guarantees for UMC to produce for them what is essentially old technology — 20,000 wafers a month for chips at the 28-nanometre node.

UMC said the deal was an “innovative, win-win” arrangement. “This will strengthen our financial position to capture the market opportunity,” Jason Wang, UMC president, told investors.

Liu Chi-tung, chief financial officer, added: “We have seen lots of capacity expansion in advanced nodes, but companies have not addressed the mature nodes. There are lots of critical components on those nodes.”

It looks as if supplies will be tight for some time to come, meaning chipmakers can expect to operate at full capacity and charge higher prices — UMC is at 100 per cent and expects prices to rise 10 per cent this year.

Chipmakers elsewhere are also benefiting — Texas Instruments beat expectations and raised forecasts in its earnings report overnight, with its shipments to the auto industry up 25 per cent. NXP also reported a 24 per cent increase in its automotive business.

Netherlands-based NXP is one of Europe’s semiconductor industry champions referred to by Pat Gelsinger, Intel’s new chief executive, in an FT opinion piece. But, as he points out, Europe is not in control of its own destiny here — its share of the global semiconductor market currently sits at around 10 per cent, down from a heady 44 per cent in 1990.

The Internet of (Five) Things

1. Alphabet’s record quarter
Google’s parent Alphabet reported record results as the pandemic kept people at home, watching YouTube videos and clicking on web ads. It also announced a $50bn share buyback programme, helping send its shares 4 per cent higher today. Lex says 34 per cent top-line growth is spectacular.

2. Microsoft boosted by X factor
Surging sales of Windows PCs and new gaming consoles, along with a growing dependence during the pandemic on digital services delivered through the cloud, pushed Microsoft’s financial performance ahead of expectations. It recorded a 34 per cent jump in sales of Xbox following the launch of the new Series X and S consoles, while revenues for its Azure cloud computing platform grew 46 per cent.

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3. Sony expects PS5 to outpace 4
Sony said it hoped sales of its new PlayStation 5 console would outpace those of the PS4, as the pandemic-driven gaming boom lifted its annual profits to a record. Since its November launch, Sony has sold 7.8m PS5s. Lex says its disappointing profit forecast suggests market expectations have outrun reality.

4. Apple turns down AirPods volume
Apple’s earnings are after the market close in New York and here’s what to expect. This week’s #techAsia newsletter reports growing competition from Asian rivals including Xiaomi, Samsung and Huawei is forcing Apple to cut planned production of AirPods by 25 to 30 per cent this year.

5. Zomato to deliver IPO
Food delivery group Zomato plans to raise up to $1.1bn in an initial public offering, setting the stage for what would be India’s biggest listing so far this year. The Gurgaon-based company, which counts Jack Ma’s Ant Group and Uber as major shareholders, was last valued at $5.4bn in a fundraising round in February. Lex has been assessing the US delivery app DoorDash’s new, lower commissions.

Tech tools — Samsung Galaxy laptops

Samsung unveiled three new laptop models at its Galaxy Unpacked event today: the Galaxy Book Pro notebook, the Pro 360, pictured, which is a touchscreen convertible, and the Galaxy Book Odyssey, a gaming laptop. The first two start at $999.99 (£1,100) and $1,199.99 (£1,200) and are available now for pre-ordering with shipping in mid-May. The Odyssey will be available in August from $1,399. The Verge says the Pro and Pro 360 are Samsung’s first laptops with OLED displays and they are very light: the 13.3in version of the Pro weighs just 1.92 pounds (0.87kg), while the Pro 360 models start at 2.29 pounds.