Reference no: EM133388857
Case Study: CNBC Marathon got an exclusive plant tour into the facilities that make the vital photolithography equipment at ASML and semiconductor micro-processer chips at TSMC and Intel. "Tour inside ASML's cleanrooms to see how these €200 million EUV systems print minuscule designs on advanced microchips using exploding molten tin, the flattest surface in the world, and light so narrow it's absorbed by air. Taiwan Semiconductor Manufacturing Company (TSMC) makes 24% of all the world's chips, and 92% of the most advanced ones found in today's iPhones, F35 fighter jets and supercomputers. Now TSMC is building America's first 5-nanometer fabrication plant, hoping to reverse a decades-long trend of the U.S. losing chip manufacturing to Asia. Intel was the leading maker of the world's most advanced chips for decades. Intel is credited with the invention of RAM and microprocessors, the very building blocks of modern computing. For years the "Intel Inside" logo is associated high performance personal computers and lap tops. Intel's history is intertwined with that of Silicon Valley. Now Intel has fallen behind. But its new CEO, Pat Gelsinger, has a bold plan to catch up to Samsung and TSMC by 2025, by building new chip fabrication plants in the U.S., Europe and Israel totaling more than $44 billion."
CNBC got an exclusive tour of the:
• ASML's EUV photolithography plant in Veldhoven,
• TSMC US$12 billion Arizona fab that will start production in 2024, and
• Intel fab expansion outside Portland, Oregon, that's set to open early next 2023.
Questions:
Sammy Kong is the category manager for semiconductor manufacturer. He ran a project to source for photolithography machines for new products which his company plans to manufacture, to supply to Apple.
At the final project presentation, the senior management arrived at the conclusion that:
• the company cannot afford the capital expenditure (capex) cost of the type of machine they require to make the high-end silicon chips, and
• the incremental revenue of $10M per year, from the new product line is insufficient to support the capex investment.
In this Make vs Buy situation, the senior management has decided it was not financially feasible to "make". So they have decided to "buy" the semiconductor chips needed for the new product line. Since Sammy had acquired the domain knowledge of the technology needed to produce such silicon chips - he has now been tasked to source for the supplier of these semiconductor chips.
(a) Examine how Sammy should approach supplier evaluation and performance management of this potential semiconductor chips supplier.
(b) Sammy and his team undertook worldwide sourcing of the semiconductor chips needed for his company's new product line. His team concluded that Taiwan Semiconductor Manufacturing Company (TSMC) is the top supplier they could outsource to. Analyze why and how TSMC became a dominant global supplier of advance semiconductor chips. Justify your reasoning based on facts from the video and your own research.
(c) Discuss the risks of buying from TSMC despite it being the top global supplier of advance semiconductor chips?
(d) In our class poll, we found that a large proportion of the class uses either an iPhone and/or a Macbook. Supply chain transparency is necessary to mitigate supply chain risks. Based on the video and information from your research, sequence the supply chain for Apple's iPhones and Macbooks microprocessor (semiconductor) chip mapped to the Tier 4 supplier(s). Name the respective supplier, their product and respective supply positioning.