A fire at ASML, the critical semiconductor equipment monopolist, may have destroyed key capacity. And semi stock TSMC went up! This is an example not of economies of scale, but economies of fail.
Governments used to encourage or even create alternate suppliers of critical goods, including farms. Now everything is shaped toward perfect monopoly and perfect vulnerability. Collapse is the goal, not an accidental result.
ASML is a true monopoly. There is no other company close to making the EUV machines that ASML does. (Ironically ASML is also beholden to other critical suppliers that hold a monopoly over certain components)
TSMC I think is more difficult to put in this category. TSMC wafer capacity is less than 15% global market share. Its semiconductor sales are smaller than both Samsung and Intel. Where TSMC dominates is on the most cutting edge chips; however, Samsung is not far behind and Intel is working on it. Both Samsung and Intel can already produce the same chips that TSMC does, but at a much higher cost point. Both are working technologies that if successful give them to potential to jump ahead of TSMC.
In the world of high tech, companies that are successful at pushing out the bleeding edge ahead of its competitors are obviously going to achieve some sort of dominance and pricing power. As long as there are competitors out there that can keep TSMC on its toes, and are pushing innovation for better and cheaper chips, I think we still have a healthy/dynamic market. A few years ago, one could make the argument that Intel was in the seat that TSMC is in today.. Tough to say who will be in the lead in 10yrs, but I'm reasonably certain we will have faster, greener, and cheaper chips.
Though I'd love to see more competitive suppliers than TSMC, it's not monopoly abuse that's keeping them on top. Intel was top dog in the semiconductor fab space 5 years ago, seeming to have at least 1-2 generations lead above everyone else. Intel floundered, and TSMC caught up and surpassed them. Intel and Samsung are all trying to pull one better than TSMC, but they're in front, and by a relatively small margin. And there's lower end players, both in China and in the west, that are also adding fab capacity as fast as they can too. And the lower end players are needed, because not every chip needs to be fabbed at the highest-end, most expensive process nodes.
Matt, I'm usually on your side, but here accusing them of monopoly abuse just isn't productive. What they're doing happens to be really, really hard.
I know much less about ASML. But if they're truly making cutting-edge equipment that no one else can match, what are the remedies to this situation? Force them to split? That would cause lots of short-term chaos in a market that needs more chips now. Force them to license patents? That's not a silver bullet, because making the equipment to manufacture their equipment would take billions of dollars of investment and years of lead time, and then they'd be a generation behind.
I don't necessarily think monopolies that exist at the bleeding edge of a tech market are so bad. I think the best way out of this are for US, Canadian, and European governments to invest in building fabs in more places, and not all cutting-edge fabs.
I've worked with some very smart people at ASML in San Diego, and they made investments over a decade ago to advance chip manufacture. Super high tech stuff with specialty lasers to make etching of chip boards even finer than before. Moving from 405 nanometer to 193 nanometer lithography using ArgonFlouride lasers is not something you expect any old startup to accomplish. There's a difference between innovation in manufacturing that only laser physicists do and a monopoly over commodity businesses.
Think about a computer. There's an analogy to be made with how it works and how the economy works. The computer has millions and billions of tiny bits and pieces to make it work. The pieces are literally called "bits". If the bits are smaller it works better, and if there are more bits it works better. Each bit is incredibly stupid but lots and lots of them added up together make an "intelligent" computer. But maybe there's a better way.... Maybe we could have fewer bits, but each with more power, each the size of a toaster and drawing the same power! How cool would that be! We could have a 3-bit computer that would hum and make enough smoke and heat to cook bread and trip the circuit-breaker. It would be impressive that's for sure. A 3-bit computer can only count to 7 and so it could do your taxes as long as you make no more than 7 cents during the year. But the smoke and grinding sounds would convey the impression of energy and power.
It seems like the "economy" is becoming stupider. It crashes, it burns, it gets stuck in canals, it can't sell a corvette to my neighbor (who would probably pay twice the asking price) because of a chip shortage. A car doesn't run on chips, and my neighbor doesn't want chips, he is an aging boomer who wants to peel rubber and impress his friends but GM can't figure out how to take his money. GM has engineered the corvette so that the critical path of making the car runs through one single kind of "chip". That's a stupid thing to do and it could be changed but GM can't figure it out. A corvette could easily run on "chips" like the 68HC11 that were developed in the 1980's with "low" technology equipment that is probably in the landfill. The corvette would not be able to order a starbucks coffee though the internet if it used those chips but who cares. The critical path of making a corvette should run through the ENGINE and leather seats, not through the chip that controls the internet connection of the car.
The economy accidentally destroys the environment and itself, on and on and these wounds are often self-inflicted. I used to think the economy was failing because of evil corporations run by nasty people with bad intentions but I don't think that's the dominant reason for things that go wrong. The economy is simply becoming less intelligent. It's not that monopolies are too big to exist, they are just too "stupid" to exist. They are going to topple over.
A computer works best with lots of small and simple bits, that's what makes it smart. The economy works best with lots of small businesses, that makes it smarter. The human brain evolved to work best with lots of small and simple neurons, instead of a few big ones. Democracy works better with millions of powerless voters making decisions collectively instead of a few powerful oligarchs. The irony is that smart people can't recognize the value of democracy and free market economics because it's too simple.
If Boeing in Seattle is nuked they have assembly plants in Wichita and North Charleston. That's why Boeing International Headquarters is now in 36-floor skyscraper in Chicago.
Coca Cola is made in multiple locations.
Corn Flakes are made in multiple locations.
Strategic and critical items MUST BE made in multiple locations. I hope the US Military agrees.
"And because of that, we should recognize that monopolies, even monopolies who have earned their market position through ingenuity, probably shouldn’t exist [...]". I think your alternative reality where these "monopolies" don't exist would be worse for consumers and societies. I don't understand the anti-monopoly stance when outcompeting everyone is what got ASML/TSMC in their current monopolistic stance. And remember there is still competition otherwise Intel wouldn't have lost its dominant position in the first place.
This post felt like it was solely based on ideology instead of logical arguments and reasoning...
This proves too much. Consider an airport in a medium-sized town. If there is a fire in its air traffic control tower, the airport is out of commission. Should there be two airports against this contingency, neither of which can do adequate business? Monopoly is not good for resilience, granted. But the relative cost of resilience and market concentration can vary.
What’s the connection with the headline “burning down Apple‘s house”. Arguably Apple’s in the best position here. Constraining the supply would increase prices but Apple’s got the margins to win that fight.