David Rosenthal: uncertainty

Transcript context

…When they were starting, and in particular, would the incumbents have started with the exact business model? No, because their profit center was the integration that all the margin you get of integrating design and manufacturing. By saying, nope, we’re going to be a pure-play manufacturer, TSMC theoretically was saying, no, we’re going to take less gross margin and we’re just going to make it up in volume. I’m actually not sure it played out that way. Do you know what Intel’s gross margins are? I actually don’t know. I would suspect they’re higher, but I don’t know. There was counter-positioning here. I don’t think I said this when we were going through it, but before TSMC and pure-play foundry model, if you were either a fabless company—one of the very, very few—or you were another IDM and you were trying to get some excess capacity rented from another IDM, mostly IDMs are going to be like, okay, you strong-arm them, you got a great strategic relationship, they’ll give you some capacity. But they also demanded the right to market your products under their brand too, which obviously, TMSC wasn’t going to sue. There was counter-positioning. The IDMs, there’s no way they were going to do what TSMC was going to do. Right. Okay, scale economies, absolutely. That is the biggest. It’s one of the top two with process power, in my opinion.…

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