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Complexity Investing & Semiconductors (with NZS Capital)
Acquired
Comparing Horizaontal v Vertically Integration in Semiconductor
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The resilience of semiconductor companies hinges on their strategic approach to the value chain. Vertically integrated companies face significant challenges as they navigate competition across multiple sectors, which can stretch their resources and focus. For instance, firms like Intel contend with competitors such as TSMC and AMD in both process technology and chip design, leading to an environment where they struggle to maintain market relevance. In contrast, companies that adopt a horizontal, pure-play approach, like TSMC, can foster trust with clients as they do not directly compete with them. This trust is critical, as clients rely heavily on TSMC's ability to meet their production needs without fear of internal competition. The demands of Moore's Law further complicate matters, as innovation and efficiency become paramount, making it challenging for vertically integrated firms to excel in all areas simultaneously. Thus, the structural differences between companies like Samsung and TSMC underscore the varied approaches to resilience within the semiconductor industry.
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