Report: GlobalFoundries accuses TSMC of unfair selling

September 21, 2017 // By Peter Clarke
GlobalFoundries has asked the European Union's antitrust regulators to investigate TSMC, accusing the rival foundry of competing unfairly, according to a Reuters report.

It was already suspected that Taiwan Semiconductor Manufacturing Co. Ltd. (Hsinchu, Taiwan) was under scrutiny by both the European and US authorities although on September 6, TSMC stated that – as of then – it had received no official request for information regarding the allegation (see TSMC responds to antitrust investigation reports).

Now Reuters reports that GlobalFoundries has asked for an investigation because of alleged unfair practices such as: demands for exclusivity in contracts, offers of loyalty rebates, the bundling of sales, and threats of restricting access to TSMC's semiconductor production. The report cited unnamed sources.

Companies that are found to have behaved anti-competitively by the European authorities can be fined up to 10 percent of their annual revenues

A source knowledgeable with the case but who spoke on condition of anonymity supported the idea that TSMC has been acting anti-competitively and told eeNews Europe that TSMC has more than 50 percent of the pure-play foundry market and 100 percent of the profit and that they have been using their prowess at the leading-edge to also maintain sales of mainstream manufacturing processes such as 28nm and 40nm by bundled selling. The source said that TSMC's behaviour had become more predatory in the last couple of years.

The source said that certain aggressive sales behaviours are not legal when practiced by a dominant player and used to maintain dominance of a market. TSMC's behaviour had extended to the broader ecosystem for supporting foundry manufacturing of ICs with discrimination against companies that had supported foundry design flows other than TSMCs, the source said.

The time period referenced coincides with the introduction of the fully-depleted silicon-on-insulator (FDSOI) manufacturing process by GlobalFoundries and by Samsung. This is a technology for which benefits have been claimed in terms of low-power and ease of manufacture, but also a manufacturing process that has struggled to find traction in the market place. In the past some observers have put that down to a 'chicken-and-egg' impasse where third parties might be reluctant to support the novel process without a clear and obvious market demand. However, an allegation of anti-competitive practices would raise the possibility that TSMC may have applied additional pressure on potential users of FDSOI to not take up the innovative process.

TSMC held 59 percent of a total pure-play foundry market worth $50 billion in 2016, according to market research firm IC Insights. That is more than five times its nearest rival GlobalFoundries.

In 2017 IC Insights reckons TSMC will hold 86 percent of the total pure-play foundry market that is for manufacturing processes below 40nm. Describing TSMC as "dominant" IC Insights said that for manufacturing processes below 40nm TSMC is expected to have 7x the dollar volume of GlobalFoundries, UMC and SMIC combined. TSMC will have sales of $18.5 billion for processes below 40nm while its next three pure-play competitors combined will achieve sales of $2.7 billion, IC Insights said.

A spokesperson for GlobalFoundries said: "We are not surprised that the European Commission is looking into anti-competitive market practices and abusive conduct in the semiconductor sector. The semiconductor industry has a history of being dominated by a few firms." The spokesperson, communicating via email, did not comment on whether GlobalFoundries had instigated the complaint against TSMC, but added: "It's prudent for the regulator to monitor behaviours more closely and GlobalFoundries will naturally support regulatory agencies as they take a closer look at this key industrial sector for Europe and the world."

TSMC was emailed for comment but had not responded by the time this story was posted.

TSMC has denied the allegations, according to the Reuters account.

Reuters quoted a TSMC spokeswoman as saying: "Our customers always have the freedom to choose, which we respect greatly, and they choose us because of the value we deliver toward their long-term success. Any accusation that TSMC threatens or harms customers is absolutely baseless, and we will vigorously defend our hard-earned trust and our most valued reputation."

Related links and articles:

Reuters report

www.globalfoundries.com

www.tsmc.com

www.icinsights.com

News articles:

TSMC responds to antitrust investigation reports

SMIC, Tower, X-Fab are strongest growing pure-play foundries

TSMC sales down, again

Samsung wants quarter of foundry market

Globalfoundries to build FDSOI fab in China


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