Both Taiwan Semiconductor Manufacturing Co (TSMC,
Due to its more efficient and advanced technology, IBM won orders in March this year from graphics-chip specialist Nvidia Corp, one of TSMC's largest customers, but Monday the world's largest computer maker announced it was laying off 600 workers in its chip-making unit and putting another 3,000 on unpaid leave next month.
"IBM does not have so much experience in the foundry busi-ness," said Ben Lee (
"Offering a total solution from chip design to the pilot production run is very complicated," he said.
"The problem is how to cooperate with clients on projects. IBM cannot compete with TSMC and UMC on this," Lee said.
In order to recoup some of the US$2 billion to US$3 billion it spent on a new advanced production plant in East Fishkill, New York, IBM decided to make chips for other companies at the plant on a contract, or foundry, basis.
Weak demand in the computer market means IBM is only able to use one third of the capacity of the plant for its own products, the company has reported.
But the Taiwanese have the industry sewn up.
"TSMC and UMC cover most of the chip companies in the world," Lee said.
"There is only a limited space for another foundry to succeed," he said.
Customers are not willing to shift to IBM as its new facility is not mature, he said.
"When the economy rallies and the market is hot again, it will be a better time for IBM to enter the foundry market, not now," he said.
Another analyst agreed that IBM's lack of experience in dealing with chip-industry customers put it at a serious disadvantage in competition with the Taiwanese.
"IBM's new facility was not originally built for the foundry business," said George Wu (吳裕良), an analyst at Primasia Securities Co.
"They had aggressive plans on their own semiconductor business, but then did not do so well, so they decided to try the foundry business," he said.
The problem is that IBM's prices are high and yield rates of its new chips are lower than Taiwanese rivals, Wu said. "TSMC is already winning some orders back."
But another analyst dismissed that suggestion.
"I think IBM's lay-offs are a result of industry slowdown rather than TSMC winning orders from IBM," said Abraham Lu (
"I was surprised by the lay-offs as IBM has gained a lot of customers recently," Lu said.
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