• 139.5 points, record high.

• +1.7 pts, driven by capacity expansion

• The CASCI cycle remains Strong, indicating continued upward momentum ahead

Upstream:

We saw continued growth in semiconductor and component makers in May. GPU and ASIC companies such as Nvidia and AMD are driving a continued boom with their release of new products for the next round of compute-platform upgrades.

Mid-stream:

Makers of electronics modules as well as mechanical parts are seeing a pause in growth. While revenue continues to rise, the rate of expansion is flat. Many of the parts going into new AI servers require reconfiguration. This includes new approaches to cooling and upgraded power-delivery.
This tepid growth is now quite prolonged, which indicates the pause is not a temporary blip. Culpium advises watching this tier closely.

Downstream:

There was significant weakness in server and system assembly in May. However, this is so far a one-off and could indicate a temporary reset after solid data over the past year. Culpium believes it’s too early to be concerned because new end-products are in the pipeline. These new systems include those based on Nvidia’s Vera Rubin platform as well as white-box installs by hyper scalers built around their own custom ASICs.

Capacity:

Companies that build factories and supply equipment are experiencing red-hot growth throughout the manufacturing value chain. Culpium has never seen anything like this.
Equipment makers are churning out new tools and machinery to meet escalating demand, largely from semiconductor fabrication, packaging, and testing.
Revenue in this sector is a reflection of delivery and contract-completion milestones. While the construction segment of the Capacity tier is solid, this strength is largely driven by equipment.

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CASCI is a weighted index tracking revenue of Taiwanese companies in the AI compute supply chain. Taiwanese companies make up the majority of upstream, mid-stream, and downstream of AI server manufacturing.

Notes for Editors & Analysts:

CASCI is published monthly by Culpium as a service to readers.
Media and analysts are welcome to cite CASCI or the Culpium AI Supply Chain index, with attribution and link. For example, “AI server manufacturing remains strong, according to the latest CASCI report from Culpium.”
Data graphics may be reproduced with credit.
Entire contents of Culpium or CASCI reports may not be reproduced unless a publishing fee is paid.

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Intel is suffering a shortage of cutting-edge laptop chips built on its own 18A process node, hampering plans by computer makers to ramp up production, multiple sources told Culpium.

Codenamed Panther Lake and Wildcat Lake, the processors are two of three chips made at 18A. The third, called Clearwater Forest and branded as Xeon 6+, is a server chip that was officially launched this week.

The chipmaker is struggling with delivery of the laptop chips and has been unable to provide clarity on when the shortage would ease, according to people I’ve spoken to at major PC brands, smaller laptop makers, and system assemblers. The supply constraints may not be entirely within Intel’s control, one of the sources told me, but instead also due to its relationship with supply chain partners including TSMC.

There is “some” shortages, Alex Katouzian, Intel’s general manager of Client Computing and Physical AI told me Tuesday in Taipei when I noted that multiple customers have faced trouble getting Panther Lake and Wildcat Lake. “We’re overcoming it,” he said to me at the end of a company press conference which included CEO Lip Bu Tan.

Intel’s struggle to deliver its first two products built around 18A are hurting manufacturers and brands who’d hoped to use the new chips, branded Core Series 3 and Core Ultra Series 3, to spark new interest in laptops, I was told.

It also stands in contrast to Intel earlier telling clients to switch over to the new chips from older versions.

Nikkei’s Lauly Li and Cheng Ting-fang reported in March that Intel was telling customers that supply of Alder Lake, Raptor Lake and Arrow Lake could run out because additional allocation was unlikely. My sources confirmed their reporting.

Alder Lake and Raptor Lake were launched at least four years ago and are both made on the company’s Intel 7 node (aka 10nm). Arrow Lake is more recent, at less then two years old, and made on TSMC’s N3 node. Arrow Lake is branded Core Ultra Series 2, while Lunar Lake is also made on a TSMC N3 variant. They’re predecessors of Panther Lake and Wildcat Lake.

“The US company says the supply situation of cutting-edge CPUs -- namely the Panther Lake and Wildcat Lake lines -- is better than that of processors based on older generations of chipmaking technologies,” Nikkei reported in March.

But according to my discussions with multiple sources, the supply situation of these two chips is not actually better.

Panther Lake was released in January and Wildcat Lake came out in April. The two chips are made on Intel’s 18A process, its comeback node, and are therefore seen by clients and investors as a key indicator of whether Intel can retake the lead in process technology from TSMC and Samsung.

It’s possible that Intel is pushing clients away from the TSMC-made Arrow Lake because its relationship with the foundry may be under strain, and this tension may continue over into troubles for the Intel-made chips, one of the people told me. Executives at Tuesday’s press briefing noted on multiple occasions that Intel still leans on external partners such as TSMC for select technologies.

The Core Series is a collection of compute dies, with the two latter versions largely made on Intel’s 18A, but they all use I/O chips made with TSMC’s advanced EUV processes. Even though the new versions of the compute dies are made at Intel 18A, the US chipmaker still sources these I/O chips from the Taiwanese foundry.

TSMC’s capacity is notoriously tight right now, and Intel is unlikely to be high on the priority list in Hsinchu. As a result, any challenges Intel may be facing with 18A output could be exacerbated by a struggle to get supply from TSMC. It also highlights how reliant Intel is on TSMC, even as it trumpets a comeback heralded by the launch of 18A.

Intel touted inhouse manufacturing when it launched Panther Lake in January with the headline: Intel Core Ultra Series 3 Debuts as First Built on Intel 18A. It did not mention TSMC as a supplier of parts of the final product, implying that the chip is made entirely at its own fabs.

One person at a tier-two laptop brand thought their company’s inability to procure the chips was due to bigger brands getting priority allocation. Yet I spoke with people at three of the world’s top-six laptop brands, and they all gave the same feedback: supply is tight. This indicates that we’re looking at a supply issue rather than a problem of demand being too strong or some customers getting priority.

Smaller unbranded manufacturers, who assemble according to orders from clients, echoed the same sentiment as the brand names. People at two separate smaller manufacturers I spoke with said they are asking clients to secure supply first before they could accept the assembly orders. This model, known as consignment, contrasts with an end-to-end manufacturing approach where the factory handles all of the procurement.

Among the theories presented to me by computer makers was the belief that Intel is prioritizing production of the Xeon 6+ server chip at the expense of the laptop chips. They also expressed concern that this situation could worsen now that Xeon 6+ has been formally launched in the market.

I asked at the Intel press conference how the company allocates 18A capacity. “It’s complicated,” Kevork Kechichian, general manager of the company’s Data Center Group, replied. “It’s not an easy thing.”

Thanks for reading.

More From Culpium:

I was asked recently what’s different about Computex this year to make it suddenly so hip. Nothing. I’ve attended each year since 2000 and it’s barely changed.1

What has changed in recent years is that the world discovered a renewed interest in computers, along with the sudden realization that Taiwan dominates the industry. This year servers — being massive computers built inside big, boring, black boxes — are now part of popular conversation and cultural discourse in ways never before seen in history.

This is my primer for how to navigate Computex, how to get the most out of it, and how to understand what’s really go on at the world’s most-important trade show.

Computex’s origin story is right there in the name, Computer Expo, and the annual event has been true to its word even as the world’s interest in computers waxed and waned.

For many years, the rise of consumer electronics, games consoles, and smartphones made computers seem dull. But the event never veered from being a showcase for computer makers who want to show off their desktops, laptops, servers, motherboards, cables, peripherals, and all that makes up the PC industry.

The show proper starts on the Tuesday of the first week of June. The Monday is not officially a show day, but some companies hold events. For a while Saturday was the final day and open for the public to come take a look (now it’s Friday). I recommend avoiding Saturday at Computex.

There’s three main parts to Computex:

• The industry keynotes.

• Forums.

• The show floor.

Keynote Speeches

Keynotes are a chance for executives to sell people on their company, their ecosystem, and their latest products. Remember, the target audience for Computex is engineers, product managers, supply-chain buyers, and global sourcing executives. It’s a tech-savvy solder-and-motherboards kind of crowd. Bus speeds and thermal thresholds are normal shop talk for these people.

For many years Intel saved one of its annual chip announcements specifically for launch at Computex. AMD often did the same. Taiwan’s VIA Technologies became a hero at Computex one year, and Intel was the villain when it burst its smaller rival’s balloons (literally, I am not kidding). Graphics chip makers ATi and Nvidia leant heavily on Computex to introduce their niche products to an attentive audience.

Computex is, and always was, the premier computer expo.

As a result, the CEO of Intel would usually provide a keynote, and one or two other bosses might show up to give a talk. A couple of foreign CEOs was about all we could expect, while local leaders like Jonney Shih of Asustek or Gianfranco Lanci of Acer would fly the Taiwan flag. Regional or VP-level bosses of global names tended to stand in as ambassadors for their companies.

This year, Computex has attracted more overseas bosses than any year I can remember, including:

• Qualcomm, Cristiano Amon

• Intel, Lip-Bu Tan

• Arm, Rene Haas

• AMD, Lisa Su2

• Nvidia, Jensen Huang3

• Marvell, Matt Murphy

• Rafael Sotomayor, NXP

Computex is not important because of all the tech CEOs who make it to Taipei. It’s the reverse, they all come to Taipei because Computex is so important.

The world’s industry elite are here in Taipei to kiss the technology ring.

I count AMD’s Lisa Su in that list, even though she was in town prior to Computex and not for the show itself. Nvidia’s Jensen Huang isn’t appearing at Computex either, for that matter. Not officially, anyway. His GTC Keynote on Monday is not part of the official Computex lineup.

But that’s kind of the point. So many executives realize that Computex, and Taiwan more broadly, are so important to their businesses that they’re finding ways to squeeze into the packed schedule. They want to make big announcements while the world’s eyes are on them, and then meet people behind closed doors to build the relationships that will make or break their businesses over the following 12 months.

The action doesn’t really happen in the keynotes, anyway. All that news will naturally flow from embargoed interviews and press releases timed to land just as the boss steps on stage.

Forums

Since the keynotes are well covered by media, press releases, and social media, your time is probably better spent in smaller sessions dedicated to super niche topics. For example, Craig McDonnell a managing director at ABB Robotics, will hold a session on Industrial-Grade Physical AI for Robotics this year. If that’s not your thing, then consider Ed H. Chi of Google DeepMind and his talk on The Future of Personalized Universal Assistants. There’s many more. There’s also side events, such as Innovex which is focused on startups and budding companies.

Companies want to present at these forums as a way to push their vision and ecosystem. Companies also want to be in the audience to learn what their rivals and partners are up to, and to swap business cards. I guarantee you’ll learn more and make better-quality connections from a few well-chosen forums than you will by attending every single one of the keynotes.

The Show Floor

I am constantly surprised when I learn that Computex visitors schedule their exit for the Wednesday or Thursday. But that’s an understandable choice if you’re not aware of where the real riches lie. And I think these early departures are informed by the dearth of good stuff left in the final few days of most other trade shows.

But the best action is neither at the keynotes nor the forums. It all happens on the show floor, in the VIP sections of those 3x3 booths,4 at the invitation-only hotel suites, and inside meeting rooms of the tech companies whose offices surround the Taipei Exhibition Hall in the nearby Nangang and Neihu districts.

Many businesses, both local tech companies and the local offices of foreign companies, mark Computex as black out days in their calendar, banning leave or business travel to ensure all hands on deck.

Overseas clients are the bread-and-butter of Taiwanese industry, particularly in tech, and local partners are primed for this annual pilgrimage. Experienced hands come because they understand something that many visitors do not. Winning over the PC ecosystem is crucial to them winning market share among end-buyers.

The tech ecosystem is more bottom-up than many imagine. Foreign clients have the money, but local suppliers have the talent and the connections.

A module maker who doesn’t want to design a circuit-board around your chip will not be an advocate for your product. A thermal management or mechanical parts player who won’t take the time to learn and build around your specs will not have something ready when assemblers need it.

And an assembler who doesn’t want to invest time and resources into developing a system that incorporates your product, in part because upstream players don’t have the pieces in place, will not even bother presenting it to a brand-name PC player.

While Dell, HP, Lenovo, Acer and Asus decide what products to sell, with what specs, and at what price, their hands are tied if the rest of the ecosystem is disinterested.

A little-known reality is that system manufacturers and their suppliers make many of the important product and engineering decisions before presenting them to the brand-name client. These choices mark the difference between your component being taken seriously or it being yet another oddity that barely shipped.

While there are many parts made in South Korea, Japan, China and even the US, it’s the Taiwan Hardware Mafia who really call the shots. A disinterested assembler, or a confused and harried module maker could kill your product before it’s left TSMC’s fabs. This is not some conspiracy. It’s cold, hard pragmatism.

Tech cycles are short. Margins are thin. Technical hurdles are high. The only speed at which this industry can operate is fast. And doing so requires cooperation among both competitors and partners. As Lisa Su said of her rivals recently in Taipei, “we’re all friends because we all grew up together.” Bringing something new to market is a huge risk for every single player who may be involved in its manufacture.

The show floor, and the hidden back rooms, are where these relationships develop. It’s at these booths where a niche maker of thermal plates, or high-speed cables, or multi-layer printed-circuit-boards shows their products. They then listen as current or prospective clients share their engineering troubles, outline their own sales projections, and then seek advice on how to build a product with oppressive margins to impossible deadlines

For major names like Intel, AMD, Nvidia, Qualcomm and Marvell, not being talked about in these discussions means your chips are being rejected by people who build the final products. Equally, failure to show and support those manufacturers will result in them working with a supplier who will.

Like any industry, relationships and interoperability matter. What’s unique about technology hardware is the combination of physical products manufactured within a product-development cycle that works at tech speed.

Computex presents a unique chance to observe this ecosystem. You just need to know where to look.

Thanks for reading

More from Culpium

TSMC’s CC Wei has negotiated with Donald Trump, delivered price rises to Tim Cook, and haggled over capacity allocation with Jensen Huang.

His hour-long talk with over 7,000 staff on Wednesday morning was far more crucial to the company’s long-term success than any other showdown the chipmaker’s Chairman and CEO is ever likely to face.

Faced with growing discontent over what many see as an unfair tweak to their compensation schedules, Wei canceled a business trip and at 5:30pm Tuesday night announced an impromptu townhall for 10am the next day. The event was in-office only — streamed to company auditoriums and meeting rooms — and booked out within 10 minutes, sources told me. Those who missed a slot could not dial in, I was told, a sign of the company’s paranoia about leaks.

TSMC pays out 12.5% of an employee’s annual bonus each quarter, with the final 50% delivered in July the following year. This quarter the company trimmed its payout while maintaining that full-year bonuses would still be higher than the prior year.

Tune in to this week’s Supply-Chained with Tim Culpan (Culpium) & Jon Y (Asianometry).
ASML: Riding the AI Wave, but Crushed by its Own Success

As Wei explained it, company profit is shared across three key categories: shareholders, employees, and ESG.

The reason for this adjustment is so the company could allocate “an even larger share of our earnings towards initiatives that foster social sustainability in order to give back to Taiwan.” In other words, more for ESG and less for staff.

The company’s explanation is staggering, confusing and not at all appeasing for thousands of the company’s 91,000 employees. Many have taken to bulletin boards and social media to express their frustration, anonymously, over what was seen as both a lack of gratitude and a measure of backsliding.

What’s particularly galling to many staff is that Wei’s own total compensation ballooned last year to $78 million — stated as NT$2.4 billion. Some employees whom I spoke with were flabbergasted when told of the CEO’s total compensation, which only came to light buried in the pages of its 2025 annual report which was published recently. They knew it was big but didn’t know it was that big. A small fraction of that figure comes from his salary, with the bulk coming from bonuses and allowances tied to performance, as well as profit sharing.

But beyond the actual figure, Wei’s total compensation as a share of net income climbed 75% in 2025. Likewise, his compensation has outpaced median employee salaries in recent years, according to Culpium calculations based on data in TSMC’s annual report and information filed to the Taiwan Stock Exchange.

In most Western countries, such large executive compensation packages are par for the course. In Taiwan, however, there’s an expectation that a modicum of egalitarianism be maintained between management and the rank and file.

Asked about his salary during Wednesday’s meeting, Wei punted and explained that his package is decided by the board, I am told. He also downplayed the prospect of a Samsung-style employee union, suggesting they’re more trouble for workers than they may be worth.

The issue is that many employees feel they’ve been working brutal hours to help expand capacity and churn out the world’s most high-tech chips amid a historic boom in demand driven by AI. It’s the staff, they reason, who should be getting the spoils and not some vague notion the company has about fostering “social sustainability.”

We would like to extend our sincere appreciation to all colleagues for their invaluable contributions. As the company continues to grow, we are highly confident that the full-year growth percentage of our employee profit sharing (based on performance evaluation) will surpass that of last year. We also believe that, with the company's sustained future growth, our profit sharing will continue to increase. — TSMC Statement, 25 May 2026.

As this issue started to boil over, a number of employees reached out to me directly to vent their frustration, share their take, and ask if I had further information. That a journalist was seen as a more reliable source than their own company speaks volumes. The tamest comments I got framed the saga as merely a problem of poor communication rather than corporate malice. Others were not so kind and noted that Wei himself enjoyed record compensation last year while revenue, profit and market cap have climbed to record highs.

These issues put together are not a good look for Wei.

In Wednesday’s townhall, he didn’t back down on TSMC’s decision to amend the payout plan. Instead, he spent time explaining the policy and then taking questions on dozens of topics which started to veer far away from the original agenda, my sources tell me.

This event may have succeeded in fending off a revolt, for now, but the lessons from Samsung show that management should not take employee goodwill for granted.

Wei, who’s been in the role for eight years, will surely know that the last time a CEO of TSMC messed up employee relations he lost his job. Wei is in his current position as a direct result of his predecessor, Rick Tsai committing an unforgiveable sin.

Back in 2009, in the dark days of the global financial crisis, Tsai implemented unprecedented layoffs. Even though the scale of the cuts — at 5% of staff — was small by Western standards, the move was widely seen as a breach of an unwritten covenant: never lay off employees.

Within months of those layoffs founder Morris Chang — who held onto the Chairmanship after handing the CEO role to Tsai — apologized for the cuts and said TSMC would welcome back all those who were laid off. Soon after, Tsai himself was booted though he stayed at the company for a few more years in a lesser role. Chang retook the CEO role and then groomed two replacements: Wei and Mark Liu, who both shared the Co-CEO role until Chang’s later retirement.

Wei has climbed through the ranks and has first-hand understanding that for a knowledge-based company at the leading edge of technology, employees are the primary reason TSMC has defeated Intel, Samsung, UMC and numerous others. And they’re also responsible for continuously keeping Apple, Nvidia, AMD and hundreds more addicted to the Hsinchu-based giant.

“Human capital is TSMC’s most treasured asset. The Company strives to provide employees with meaningful work, continuous learning, a healthy and inclusive workplace, and high-quality compensation and benefits” — TSMC 2025 Annual Report.

But touchy-feely measures like staff gymnasiums, exclusive company-branded merch, an annual sports day, and the warm glow of being a good corporate citizen do not make up for the one reason workers at every company turn up each morning: the money.

And Wei himself knows a little about money. His own compensation has climbed 10-fold over the past decade. It would be hard to argue that he does not deserve the fat pay package, but it would be impossible to argue that his staff don’t deserve more, too.

And now is not the time to turn his back on an employee-first culture or pinch pennies.

A widening global rollout, including a record pace of expansion in Taiwan, coupled with new fabs in Arizona, Japan and Germany will raise the need for staff. And finding the right staff isn’t easy. More than half its headcount has at least a Master’s degree. Concurrent booms among memory-chip makers, a resurgence at Intel, and more global tech companies getting into the chip-design business is increasing competition for a limited pool of talent.

Its troubles in Arizona highlight the issue of attracting and keeping talent. TSMC is facing a class-action lawsuit claiming discrimination, while a rising number of staff are quitting to return to their old jobs at US companies like Intel, Micron and Texas Instruments. Then there’s China, where dozens of state-backed companies are eager to write fat checks to any TSMC engineer willing to cross the Taiwan Strait.

TSMC is rightly proud of its ESG policies, which include buying renewable energy, recycling water, and giving to charity. But in attempting to “foster social stability,” Chairman and CEO CC Wei may be forgetting the most important policy of all: If you don’t keep your staff happy, someone else will.

Thanks for reading.

More From Culpium:

Allow me to congratulate you on your successful trip to Beijing. I’ve heard the trees at Zhongnanhai are quite lovely. I cannot visit of course, since your host thinks of me as a “separatist,” which is a swear word in their country.

You can tell me more about those trees, and Beijing, and Mr. Xi when we talk. I assume we will talk since, when asked by reporters on Air Force One about selling us weapons, you replied “I have to speak to the person, you know who he is, that’s running Taiwan.”

That person, Mr. President, is me. It’s possible you forgot my name. No problem, I’ll remind you: It’s Lai Ching-te. The “te” is pronounced “de,” but you can just call me William Lai. I am the elected president of Taiwan, so I am the person who is running Taiwan. I’ve been doing so since 2024.

I hope we get to talk, because it would be helpful for me to set the record straight and ease your concerns. It seems you have many concerns when it comes to Taiwan, including the view that Taiwan is a “problem” to be “solved.”

Let’s start with Taiwan independence. Mr. Xi probably told you that he is worried Taiwan will declare independence. Or maybe he didn’t say that he’s “worried.” He probably used harsher words than that. Let me allay your fears Mr. President, I will not declare Taiwan independence because we’re already independent. We exist under the name “Republic of China,” but as you know Mr. President, that is not the same as the “People’s Republic of China” where you traveled last week.

Think of it like the “Democratic People’s Republic of Korea,” run by your not-so-democratic friend Mr. Kim Jong-un, and the “Republic of Korea” which actually does have democracy. To the rest of the world they’re known as North Korea and South Korea. Different countries, independent of each other, and using names that are different to their official titles. Imagine if President Kim were to threaten to invade South Korea should Seoul declare independence.

But as I said, Mr. President, I don’t intend to declare independence for Taiwan. Now, I may make some bold and inflammatory statements from time to time, but really that’s just pillow talk for my political base. We’re a democracy, after all, and that means keeping core constituents happy. I am sure you’re familiar with the concept.

Presidential Office responds to remarks by US President Donald Trump in media interview

For example, “lock her up” and “build the wall” were quite helpful in energizing your supporters, but you didn’t actually do either and no one held you to it. Except in my case, we did lock him up. I mean, he was convicted of graft and probably did do it. But who’s to say? It’s really just convenient that our independent judiciary found one of my major political rivals guilty.

But there’s something else that’s been gnawing away at me, and 23 million of my fellow countrymen.

Chips.

You keep claiming that Taiwan took your chip industry. At first I thought it was just one of those throwaway lines aimed at shocking your audience. But you’ve said it so many times that I am starting to think you believe it.

This really isn’t true, Mr. President. Taiwan didn’t steal America’s chip industry. If anything, Mr. President, we saved it.

You needn’t take my word for it, I am a politician after all. Perhaps you could ask Jensen Huang, whom I know you listen to. Now, I cannot speak for Mr. Huang, but he has said on more than one occasion that if it wasn’t for TSMC then Nvidia wouldn’t exist.

This is indeed the truth.

You see Mr. President, Taiwan paid one of America’s ailing industrial empires a handsome sum of money in the 1970s. The year was 1976, and Taiwan’s Industrial Technology Research Institute (ITRI) signed a $3.5 million deal with Radio Corporation of America to teach our engineers how to make chips. Taiwan’s gross national product was just $1,143 per person that year, so $3.5 million was a huge sum for a developing country. But still, we paid in full. We didn’t steal.

Now, as you know Mr. President, thousands of people come to the US every year and pay large amounts to learn from prestigious institutions like the University of Pennsylvania, your alma mater. They then take that knowledge back home and apply it locally. That’s what our engineers did.

After learning from RCA, they returned home and found they’re pretty good at this semiconductor stuff. I guess you Americans are great teachers, because within months of their return our young engineering students were making chips even more efficiently than their American masters ever did.

That same year, Mr. President, an American citizen proposed a radical idea to his bosses at Texas Instruments. How about making chips for external clients instead of just for itself. This business model, known later as a chip foundry, was rejected. The Texans weren’t interested.

A decade later, that engineer-turned-executive moved to Taiwan — a place he’d never previously resided — and started the business he’d previously suggest to his superiors at that great American institution. His name, Mr. President, is Morris Chang and the company was TSMC. He stole nothing, Mr. President, in fact he’d offered that very idea and the business plan to his US employer 10 years earlier and they turned him down. He event went back to Intel and TI to see if they’d like to invest in his new startup, they again said no.

This was a missed opportunity by those two American companies, but a great win for America. That’s because, Mr. President, Taiwan’s budding chip industry was a partner to the US, not a foe. As Silicon Valley faced growing rivalry from Japan and later South Korea, Taiwan’s counterpart — the Hsinchu Science Park — became America’s biggest supporter. Qualcomm, which helped America dominate mobile phone technology for the past three decades, would have got nowhere without TSMC as a neutral party, making its chips without competing against it.

And when Apple wanted to have a US-made processor for its iPhone, America’s beloved Intel “ended up not winning it or passing on it, depending on how you want to view it.”

Instead, Steve Jobs was forced into the arms of his biggest rival, South Korea’s Samsung. Later, after accusing Samsung of stealing from him and threatening “thermonuclear war” it was Taiwan who stepped up and helped Apple extricate itself from Samsung. After an introduction by Foxconn founder Terry Gou, you remember him, TSMC’s Morris Chang built a dedicated factory for Apple in record time and at record cost. Dr Chang even agreed to develop a process node just for Apple.

What I am trying to say, Mr. President, is that the first iPhone processors weren’t even American. But Taiwan didn’t steal them. They in fact handed control over Apple’s chips back to Apple when an American couldn’t (or wouldn’t) do the job, and another foreign rival started “stealing” US technology.

Then there’s the story of AMD. After making its own chips for decades, AMD was losing far too much money to sustain the pace of innovation. No one stole anything from AMD, it just couldn’t keep up, so it sold its manufacturing business. Not to Taiwan, but to a group of Middle East investors who dubbed it Globalfoundries.

But those new UAE owners didn’t necessarily have the interests of AMD, or America at heart. Mr. President, these Emirati owners extracted a promise from AMD that all its best chips would be made at Globalfoundries. Unfortunately, Globalfoundries wasn’t very good. They were so bad, in fact, that AMD paid the Emirates-owned company to not make its chips. That’s right, Mr. President, a storied American company had to pay its foreign-owned supplier for the right to not make its products for them.

However, who do you think saved AMD? You guessed it, Taiwan.

When that 10-year exclusivity deal finally expired in 2019, AMD went straight to TSMC. And what happened next will amaze you. Within two years of being unshackled from its unfair deal, revenue doubled. Within four years, AMD revenue had climbed four-times. This is not gossip or hearsay, Mr. President, these are facts documented in detail by the great American AMD.

So we come back to Nvidia. Another great American company that wouldn’t exist without TSMC. When a young startup founder with great ideas and courage, but no reliable manufacturing partner and almost no money sent a letter to Taiwan in 1997, he was astounded by the response. Jensen Huang was desperate. But instead of being dismissed for being too small or irrelevant, Dr Chang called Mr. Huang directly, and then met with him in person. He promised that TSMC employees would 'jump through hoops' for Nvidia. And they’ve continued to do so for three decades.

If you want to learn more about stolen businesses and technology, Mr. President, I invite you to contact folks at T-Mobile, Boeing, GE Aviation, Cisco and Google. Each of them can provide accounts of their own technology being stolen, by China.

You see, Mr. President, we don’t have any need or interest in stealing from our friends. And we still see the US as a friend.

This is a point of conflict in Taiwan now, actually. My opponents accuse my government of being too close to the US. These political rivals, from the Chinese Nationalist Party (KMT), feel Taiwan should be a little more distant from Washington and a little closer to Beijing. Your continued complaints that Taiwan stole a key industry from America make my case tougher by the day, even despite the fact that Washington’s historic support for Taiwan is a key reason why the KMT survives to this day.

I understand that you need to look after your people and your own political interests, and that bashing Taiwan is useful in achieving that. Like you, I am also an elected leader who first came to power with less than a majority of the vote. But, hey, we didn’t make the rules! Amirite?

Still, despite this Taiwan-bashing, our companies are still investing in America. Foxconn, whom you once boasted was going to build “the Eighth Wonder of the World” in Wisconsin, is making amends for that broken promise. In fact, it’s now making more of its AI servers in the US than anywhere else. TSMC is following through on its commitment to expand in Arizona, and many more companies including Quanta and WiWynn are spending their own money to help you “Make America Great Again.”

You may not be aware, Mr. President, but Taiwanese companies did more to boost American computer and electronics manufacturing in the ten years through 2023 than Chinese businesses did. Our $7.3 billion in foreign direct investment in the US outweighs $6.6 billion from China, and that’s before the massive influx from TSMC really kicked in. Then there’s the massive increase to $165 billion which TSMC has promised as a result of your superb leadership. Is there any Chinese company which has promised you anything close to this figure?

Mr. President, I am not complaining. Politics is politics, and for a man who wrote The Art of the Deal, I understand that these statements about Taiwan stealing your chip industry might be just part of your negotiating tactic. But I wouldn’t be doing my duty, as the man “that’s running Taiwan,” if I didn’t correct the record.

Yet, on another point of record, I should also thank you for your fine display of statesmanship. You told the press, when asked about Mr. Xi’s warnings over Taiwan, that you “heard him out” yet “made no commitments.”

I take this response as you showing the world that you didn’t let Mr. Xi box you into a corner. Any lesser leader would have either pushed back or cowered, you did neither.

I have also held my ground. After months of wrangling and politicking, our government has finally succeeded in pushing through a special defense budget which will allow Taiwan to purchase more than $24 billion in US weapons. That means more money for great American companies like RTX Corp and Lockheed Martin.

In summary, Mr. President, we didn’t steal your chip industry and we are willing to pay for our own defense.

But I have a favor to ask. When you do make the call, which I am most looking forward to, I hope it’ll be to tell me you’re approving the arms sale my DPP government expended a lot of political capital trying to fund.

You see, we too have an election coming up, and I’d hate to resort to waving the Taiwan independence flag in order to win votes. But if I do, don’t worry, it’s just politics.

Lai Ching-te (William)
President of Taiwan (aka Republic of China)

Thanks for reading.

Readers: This is satire, written by Tim Culpan for Culpium. It was not written by President Lai Ching-te of Taiwan.

Chinese AI models really aren’t as good as their US peers, despite claims on both sides to the contrary. That’s not just my assertion, but the view of many Chinese themselves. And they’re desperate to access the best models available.

After doing a backflip on banning Nvidia chip sales to China, AI will be among the items on Trump’s agenda when meeting with Chinese leader Xi Jinping this week in Beijing.

Catch the latest episode of Supply-Chained across all podcast platforms.

The disparity in both computing power and AI models has spurred a burgeoning industry of arbitrageurs in China who hunt down loopholes and flagrantly flout curbs to access models from OpenAI, Anthropic, and Google. It’s an industry driven by China’s lagging position and users’ desire to access something better.

Those exploiting this mismatch are not even trying to hide.

“Shattering commercial and geopolitical silos,” is the boast from B-AI, an outfit backed by Trump friend-turned-foe Justin Sun.

B-AI (白) is merely the latest in a long lineup of what Chinese call “transfer stations” — middlemen who take in AI requests from users and reroute them to US providers, then return the response.

The advantage is written clearly on their own websites. “No more worries about account bans/limits,” another transfer station called OneToken states plainly.

Writing for ChinaTalk, Qian Zilan — a research associate at the Oxford China Policy Lab — recently gave a detailed rundown on the mechanics of transfer stations titled How to Buy Cheap Claude Tokens in China. It’s well worth a read.

US companies’ curbs on using their models date back a few years. In July 2024, OpenAI cut off Chinese access to its Application Programming Interface (API) a few months after announcing that it “terminated accounts associated with state-affiliated threat actors.” An API allows programmers to send data directly to a server without the an interface wrapper such as a Website or mobile app.

As Kevin Xu of Interconnected Capital wrote at the time, “plugging the leaky API bucket is the next phase of AI model export control.”

To be clear, these bans didn’t come directly from the US government, instead they’ve been largely imposed by the AI companies themselves. A year after OpenAI’s API curbs, Anthropic closed a loophole in its own rules by preventing Chinese-owned entities from using its models.

“Companies from these restricted regions—including adversarial nations like China—continue accessing our services in various ways, such as through subsidiaries incorporated in other countries,” it wrote at the time.

OpenAI and Anthropic have numerous reasons to want to boot Chinese from their platforms, beyond supposed concerns over national security. A major catalyst is allegations that rivals like DeepSeek are harvesting data from US providers and then distilling them down to create their own models. This has been lauded by many as an example of Chinese “brains” defeating American “brawn.”

Despite the supposed advantage brought by this innovation, Chinese AI providers still seemed pretty excited about Americans exiting their local market. Within hours of OpenAI’s 2024 announcement, Zhipu AI welcomed ChatGPT refugees to its platform with a “relocation plan.”

And yet, Chinese users don’t seem satisfied with local offerings, hence Xu’s prophetic view about ban-enforcement becoming a cat-and-mouse game. Wherever there’s strong demand, eager entrepreneurs will step in to offer supply.

AI Flash Boys

The result is a growing industry of what I call “AI Flash Boys.” The term Flash Boys was popularized by Michael Lewis in his best-selling book of the same name. By exploiting lags between the time an order is made and the time it’s placed on a stock exchange, high-frequency traders (HFTs) could intercept trades and front-run them.

Whenever a disparity exists in availability and access, an arbitrage opportunity arises. In Flash Boys, availability was the supply of market orders and access was the time at which someone could view them. HFTs had an advantage in when they could see and act upon a buy or sell request. Location is the most common form of arbitrage — a commodity bought and sold in disparate locations or exchanges offers a chance to trade both ends and pocket the difference.

The key to a profitable arbitrage strategy, though, is that the disparity must be both persistent and scalable enough to be worthwhile.

In China, the AI Flash Boys are benefiting from disparities in not only region, but price. And they’re exploiting local users’ escalating demand for the world’s best AI models.

The region issue is somewhat obvious, and arises from the ban imposed by service providers. If you can fake your location, then you can pretend to be non-Chinese. VPNs were once the primary method, but everyone has cottoned on to this approach and it rarely works. Beijing often tolerates VPNs, but has shown a willingness to shut them down. Likewise, Western providers regularly cut connections that come in via VPN.

Transfer stations get around this by having a genuine non-Chinese connection. Situated in Singapore, Malaysia, or even the US, they open up API access directly to Anthropic or OpenAI with little trouble. They then offer Chinese consumers access, with local billing in Chinese yuan via AliPay, WeChat Pay, e-CNY, cryptocurrencies, and even Apple Gift Cards. Hence, the transfer station links the two sides.

Pulling Wool

An interesting quirk of the Chinese model is that transfer stations offer access to US models at crazy big discounts. The method is ridiculously simple — like forehead-slappingly “why didn’t I think of that?” simple. OpenAI, Anthropic and Google are so desperate to get people onto their platforms that they give away time-limited freebies. Transfer stations exploit these vouchers — a phenomenon known among consumers as “pulling wool” (薅羊毛) — to open accounts en-masse and then cycle through them as they expire.

US service providers offer other ways to game the system. Microsoft, for example, gives discounts of as much as 75% if you batch your queries to OpenAI for a reply sometime in the next 24 hours. There’s also discounts for tokens already created and served up previously by the AI model. Meanwhile, unlimited plans offered by Anthropic and their ilk allow transfer stations to spread the cost over hundreds of their individual customers.

Cache Distillation

Then there’s caching, header-swapping, and other dubious schemes. By saving queries submitted by Chinese users and the response from the US provider, transfer stations can build their own model, a form of distillation which I call “Cache Distillation.” They can then dish up the same response next time a different user asks a similar question, with the legitimate claim that it came from ChatGPT or Claude.

More nefarious though is header-swapping. A provider sends the query to a cheaper local model, such as DeepSeek, or a lower-spec version of the same US model, then returns the reply with a claim (via the data header) that it was delivered by the premium alternative.

The fact that new players like Justin Sun-backed B-AI are entering the market while hundreds of other providers have been thriving for years tells you something about the Chinese AI market. This kind of arbitrage is only possible because Chinese users consistently see US models as a preferred choice over local options.

And this view is not just prevalent among everyday consumers. Upper echelons of the Chinese government also want access to the best America has to offer.

Mythos Envy

Last month, a Chinese think tank asked Anthropic directly for access to its powerful new artificial intelligence model, insisting the startup change its stance on curbing availability to Beijing, the New York Times reported on May 12. The answer was no, the newspaper reported.

“A senior US official said AI and cybersecurity were high on the agenda with Beijing, noting concerns with ‘the latest models of AI,’” the NYT wrote. While it wasn’t clear exactly which model the Chinese think tank wanted, the newspaper hinted that they were talking about Anthropic’s unreleased Mythos, billed as so powerful that “it was skilled at finding software vulnerabilities and could cause a cybersecurity reckoning.”

With Nvidia’s Jensen Huang in tow, and in light of Trump’s previous reversal on banning chip sales to China, there’s no telling what concessions the US president will offer to Xi Jinping during his visit.

Perhaps he’ll keep acceding to Huang’s wish to let some Nvidia chips remain on sale in China, and at the same time placate hawks back home by formally curbing Chinese access to US models.

Even though China decided it would regulate the import of Nvidia’s H200 chip soon after Washington lifted a ban on shipments to the country, Beijing has not formally banned access to American AI models. Instead, it limits usage through virtual curbs such as putting them outside the Great Firewall and regulating usage through censorship laws. This is the same tactic used to push Google and Facebook out of China more than a decade ago.

It’s also the same loophole which transfer stations are exploiting, and it’s a tactic that Beijing is well aware of. In fact, it follows China’s own track record of allowing access to, and development of, innovative technologies to further the nation’s progress and then yanking that availability when it feels the time is right.

As a result, this quasi-legal status of US models in China allows local developers to leverage superior foreign models, without legitimizing them or giving American AI providers true access to its market. And they can be shut out at any time for any reason — or no reason — just by enforcing existing regulations.

With AI safety on the agenda this week, we might expect Washington and Beijing to pen some kind of watery agreement to “not do evil” and “keep talking,” but it’s in neither Xi’s nor Trump’s interests to truly shutdown the flow of tokens between their nations.

In fact, the grey market may be just what the US president wants. His family’s World Liberty Financial just announced “World Router,” the company’s entry into the transfer-station business. That could incentivize Trump to back a ban on US models in China, while leaving the door open for transfer stations to keep doing business. Xi would surely approve, unless China one day catches up in which case these transfer stations will no longer be needed.

Thanks for reading.

More from Culpium:

• 137.8 points, a new record.

• +2.1pts, accelerating from +0.2pts in March

• Upstream growth is rising, Mid-stream, Capacity both slowed significantly.

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Upstream:

Upstream suppliers in semiconductors, materials, and passive components once again saw a large increase in growth, an indication of strong momentum for the primary parts used in AI servers.
This tier still lags the growth levels seen in mid- and downstream, but points to more product being pushed down the channel and into the supply chain.

Mid-Stream:

Companies in the middle of the supply chain weakened.
While they’re still showing growth, module makers, mechanical suppliers for racks, drawers, and fittings, as well as cooling systems manufacturers are collectively showing their weakest levels of expansion since April 2025.

Downstream:

Companies focused on system integration and final assembly of AI servers saw their growth rates unchanged in April, the mildest pace in many months.
Coupled with slowing supply from mid-stream, we can see early signs of a possible pause in AI-server growth.

Capacity:

The business of supplying equipment and constructing facilities remains strong, but is weakening significantly.
It’s important to remember that this tier of the supply chain reflects long-term trends, with monthly swings often unstable as it reflects completion of phases rather than specific changes in contracts or sales. That said, it’s worth watching capacity suppliers over a period of months to assess whether manufacturers are adjusting their expansion plans.

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CASCI is a weighted index tracking revenue of Taiwanese companies in the AI compute supply chain. Taiwanese companies make up the majority of upstream, mid-stream, and downstream of AI server manufacturing.

Notes for Editors & Analysts:

CASCI is published monthly by Culpium as a service to readers.
Media and analysts are welcome to cite CASCI or the Culpium AI Supply Chain index, with attribution and link. For example, “AI server manufacturing remains strong, according to the latest CASCI report from Culpium.”
Data graphics may be reproduced with credit.
Entire contents of Culpium or CASCI reports may not be reproduced unless a publishing fee is paid.

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Apple has doubled its MacBook Neo production plans after the laptop’s runaway success, my sources tell me.

Last month Culpium broke news that Neo sales were doing better than Apple had expected, pushing the company into a tough dilemma. Demand heavily outstripped supply, forcing the company to quickly make a decision about the product’s near-term future, Culpium wrote at the time.

Apple is in talks with suppliers to handle a massive dilemma posed by sales of its MacBook Neo that have surpassed expectations, I am told. The question they must answer, and soon, is whether to boost production of the hit laptop, or let their inventory of parts run out, my sources tell me — Culpium, 7 April 2026.

Its earnings report last week brought this issue to life, with Neo driving Apple’s best fiscal second-quarter for Mac revenue since the Covid pandemic.

“Right now we’re supply-constrained on the MacBook Neo,” CEO Tim Cook said in the company’s April 30 investor conference call. “We were very bullish on the product before announcing it, but we under-called the level of enthusiasm that would be with it.”

Tune in to this week’s Supply-Chained with Tim Culpan (Culpium) & Jon Y (Asianometry).

Episode 3: ARM Might be Swallowing its Own Poison Pill

MacBook Neo is now seen as a legitimate alternative to Chromebooks, powered by Google’s ChromeOS, as well as low-end Windows laptops. The cheapest member of the MacBook series is likely to lure more companies and students into adopting the MacOS ecosystem, broadening Apple’s user base.

We’re swapping out Chromebooks for Neos over the next few weeks
by u/shinyshirtlesssulu in MacbookNeo

This unprecedented popularity left Apple with an important decision to make: It could sell out of the Neo, thus forgoing sales but preserving profit margins. Or order up a new batch and face a severe cut in gross margins amid escalating DRAM prices and a higher cost-base for the core processor.

Apple recently made its decision and opted to put more units of the Neo in customer hands.

As a result, it’s now asking suppliers to prepare capacity for 10 million units of the debut version of the Neo, up from an initial estimate of 5 million to 6 million, my sources tell me. Delivery times for the laptop have ballooned to as much as four weeks as Taiwan’s Quanta and Foxconn rush to fill orders from factories in Vietnam and China.

This renewed commitment to meeting demand means Apple must also ask TSMC for a hot lot of A18 Pro chips, the same processor used in the iPhone 16 Pro. The system-on-chip is made using TSMC’s N3E process, with the initial production run underway at least two years ago.

However, the chips used in the Neo are actually downbinned versions of the one used in the iPhone, meaning some parts of the die were considered defective or unable to run at its full design spec.

In keeping with industry practice, instead of scrapping these “less-than-perfect” chips, Apple turned off the defect parts and repurposed it for another product. As Ben Thompson of Stratechery wrote at the time, this downbin strategy means the SoCs in the Neo are effectively “free chips.”

Jon and I discussed binning at length in a recent episode of Supply-Chained.

The iPhone 16 Pro’s processor has six GPUs, whereas the MacBook Neo’s has only five — it’s the same chip, but with one GPU core turned off.

With a fresh batch of A18 Pro SoCs, most of the new processors for the Neo will actually be top-tier and only some would fall into the downbin category. This means that in most cases the six GPUs would be fully functional. Apple is likely to deal with the disparity by simply switching off one of the GPUs through software.

The other issue Apple must face is the higher price. While TSMC may forego massive price premiums for a hot-lot run, the SoC will still be more expensive than the first batch because they’ll mostly be top-tier rather than downbin versions. In addition, DRAM prices have escalated since the initial production run, driving the Neo’s bill of materials much higher.

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Apple currently offers the Neo in 256GB ($599) and 512GB ($699) versions with four colors apiece. A month ago I suggested that to deal with the higher cost and lower margins of a new batch, Apple may kill the cheaper version and only offer the 512GB variant. It recently followed that strategy with the Mac Mini, pulling the $599 256GB model from sale leaving only the $799 512GB version available.

Alternatively, Apple might add some new colors to the Neo lineup to soften the impact of higher prices and boost enthusiasm for the device.

Thanks for reading.

More from Culpium:

Samsung reported first-quarter earnings Thursday morning. What it revealed was great news for itself and fellow memory-chip makers but bodes very badly for everyone else.

Revenue at the South Korean company’s memory division doubled from the prior quarter as it started catching up to smaller compatriot SK Hynix in the lucrative market for high-bandwidth memory (HBM). Like SK Hynix a week ago, Samsung made all the right noises about HBM being important and its determination to boost supply.

Reading between the lines, though, it doesn’t feel like either company is taking the AI boom seriously enough, and they certainly don’t seem to care much about their long-time clients in the smartphone and computer sectors. At best, it looks like Samsung, SK Hynix, and US rival Micron are more intent on leveraging their pricing power than helping clients get the products they need.

Tune in to this week’s Supply-Chained with Tim Culpan (Culpium) & Jon Y (Asianometry).
Episode 2: Binning. An Old Nvidia Practice that’s Also Behind Sparse Supply of Macbook Neo

Witness SK Hynix’s first-quarter results. DRAM revenue, which accounts for 78% of its business, climbed around 65% while the average selling price also climbed around 65%.

SK Hynix didn’t sell more DRAM, it just charged more for it.

Samsung and Micron told a similar story. At Micron, whose latest quarter ended in February, ASP was up a mid-60s percent with revenue growth in the low-70s — its actual shipments, measured in bit-growth, barely budged. Similarly, Samsung’s DRAM revenue-growth tracked prices not output: ASP was up more than 90%, while shipments inched up just a few percentage points.

There have been loud complaints that TSMC didn’t expand enough to meet growing AI-driven demand from Nvidia, AMD, and cloud-service providers. But there’s been scant attention paid to the fact that these three major memory-chip suppliers collectively failed to either see, or take seriously, this historic moment.

I find that staggering, because I foresaw it three years ago.

“AI companies are likely to buy up more DRAM than any other slice of the technology sector in history,” I wrote in a previous life (gift link). “Established giants like Microsoft Corp. and newcomers such as OpenAI are set to pound on the doors of Samsung, SK Hynix and Micron”

That was back in May 2023, and over the past year this “pounding on the door” scenario has played out exactly as I predicted. And if I, a mere outside observer, could see what was about to happen then it’s impossible that executives at three huge semiconductor companies couldn’t.

Instead, what we’ve seen in recent quarters is management enjoying huge gains in revenue and profit without having to do the actual work of, well, shipping more product. The commodity nature of memory chips is such that when demand exceeds supply, prices quickly rise. The reverse is also true.

What’s worse, they’re all now crowing that this situation won’t end anytime soon.

“Amid this supply-demand imbalance, customers are prioritizing securing volume over pricing which is sustaining the current pricing strength,” SK Hynix CFO Kim Woo-hyun boasted last week. “Accordingly, we expect a favorable pricing environment to continue for the time being.”

Samsung was just as blunt about how desperate its customers are, and how the world’s biggest memory-chip maker plans to keep taking advantage of them.

“Unlike previous years, customers who are concerned about supply shortages are actually bringing forward their demand for 2027 already,” it said in Thursday’s investor call. “So, currently just based on pre-booked demand alone, the supply-demand gap is looking to widen further in 2027 versus this year.”

From a purely capitalistic point of view, I guess you can’t blame them. The memory sector is cyclical. You enjoy the growth years when you can, and limit pain of the down cycle when it comes. That’s the business model, and both management and investors have learnt to accept it.

Unfortunately, on this occasion customers are learning that they too must accept the vagaries of the memory industry. But it’s causing a lot of pain, will likely lead to billions of dollars in lost revenue, and hand more control to Chinese rivals just as global technology competition escalates.

Worst hit will be PC and smartphone makers, who are having to rethink their product strategies given the long-term higher costs of both DRAM and NAND. We’re already seeing this play out.

All but Apple experienced a drop in first-quarter smartphone shipments, according to data from Counterpoint Technology Market Research. Xiaomi was worst hit, with a 19% fall.

“The brand is facing acute pressure as its heavy exposure to the price-sensitive entry-level segment makes it highly vulnerable to rising memory costs,” Counterpoint wrote of Xiaomi’s struggles. A delay in Samsung’s premium S26 series meant that even the Korean brand couldn’t stave off a downturn brought on by shrinking demand for mass-market devices.

Samsung’s smartphone chief addressed this issue in Thursday’s earnings call, noting the need to manage cost pressures and reorient toward premium devices over low-end models. I discussed this dilemma at length last week with Jon of Asianometry in our debut episode of Supply-Chained.

The PC sector will be similarly affected. Lenovo, which is number one with around 25% of the market, skews toward consumer and small & medium-sized business customers. That makes it potentially more vulnerable than HP and Dell who lean more heavily on larger corporate customers by selling both personal computers as well as infrastructure products like servers.

The three big memory-chip makers needn’t care. They have customers lining up for the next few years, many trying to lock in multi-year purchasing agreements. That’s given these oligopolists the confidence to finally start boosting capex, albeit too late and by too little.

But it’s not going to much help the rest of the tech sector, because most of that money is going toward boosting HBM supply used in AI servers, leaving those requiring legacy DRAM to flounder.

Boring old DRAM is needed in PCs, smartphones, games consoles, security cameras, cash registers, and cars. It’s boring because it’s ubiquitous. And it cannot be replaced by HBM because the high-bandwidth variant is attached directly to a processor via advanced-packaging techniques such as TSMC’s Chip-on-Wafer-on-Substrate (CoWoS). Legacy DRAM is often just soldered onto a printed circuit board and slotted into the final device.

The top three, which collectively control 90% of the DRAM market, may feel that they don’t need the old-school DRAM market anymore. But that’s very short sighted, because they’re handing orders and client relationships over to rivals in China, which threatens to take over the memory sector like it did legacy semiconductors and LCD display panels.

Whereas Western brands had become wary of buying memory chips from China, they now have no choice. Even HP, with its long-term No China policy, must turn to ChangXin Memory Technologies (CXMT), a growing player in DRAM and Yangtze Memory Technologies Co. (YMTC), which is now a force in NAND.

HBM may be the hot item now, but legacy DRAM will forever be important to the world because of its simple but critical role in how information is computed. The risk is that, as with other commodities like rare earths, China may soon have command of a critical product crucial to the global technology sector. Not that it’s Samsung, SK Hynix, or Micron’s job to care. Their job is to make money, not protect supply chains or national security.

Maybe Seoul, Tokyo and Washington might start to care, but given the current emnity between them all, I struggle to see their governments working together to effectively address the issue.

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In the short term, those parts of global tech sector which are not building AI servers — which is most of the global tech sector — will continue to suffer. In the long-term, the entire tech sector may find itself facing an even worse problem than high memory-chip prices. Unless someone stands up and does something about it, before it’s too late.

Thanks for reading.

More From Culpium

Cook’s re-engineering of Apple started in 1998, more than a decade before he took the CEO mantle from Jobs. He had an impact almost immediately, but there are many misunderstandings about what Cook actually changed about Apple’s operating model.

Introducing Supply Chained
A new podcast hosted by Tim Culpan of Culpium (me) and Jon of Asianometry.
We explore the depth & history of supply chains to unveil how today’s technology is made. And what comes next.
We hope you’ll join us.

As senior VP of worldwide operations, Cook was not the man who brought outsource manufacturing to Apple. Nor was he the man who brought China into the company’s supply chain. Both moves predated both Cook, and even Steve Jobs’ return to the company he founded.

Ireland, Singapore, Japan, and South Korea had been sources of Apple product and components since at least the early 1990s, both for inhouse production and also external component supply.

Outsource contract manufacturing was already well underway, not from Asia but via American companies such as SCI Systems and Solectron who pioneered the model. Foxconn founder Terry Gou, at the encouragement of a senior Apple executive, embraced that electronic manufacturing services (EMS) framework.

Seeing the future, Gou slowly oriented his Taiwanese empire away from mere plastics and mechanical components — like metal PC cases — and dove deep into integrated vertical manufacturing. Dell and Compaq had signed on as clients well before Apple came along.

In other words, outsourcing to Asia was underway by the time Cook arrived. It was already in Apple’s future. Cook embraced it.

Yet, Cook and his team brought important operational innovations that remain significant a quarter of a century later. Among them, Apple went deeper into the little-understood but hugely impactful practice of equipment consignment. I wrote about this 16 years ago when I profiled Gou and Foxconn for Bloomberg Businesweek. Patrick McGee covered it in his recent book “Apple in China.”

Made to Measure

Apple often pushed the boundaries of what was physically possible, and that usually meant the need to use new and unique equipment. Its suppliers rarely had the funds to buy such expensive kit, so Apple would write the check with a very specific stipulation: it could only be used to make Apple’s products. This allowed the manufacturer to get the tooling needed to satisfy Apple’s niche requirements, but also locked up factory capacity and resources. Cupertino still uses this strategy today.

There are numerous examples of Apple building unusual relationships with its supply chain, down to insisting that an off-the-shelf component be tweaked just for them.

But beyond the minutiae of manufacturing, Tim Cook’s Apple changed the world in bigger ways.

In my opinion, three foreigners have done more for the development of the modern PRC than anyone else. The first is Henry Kissinger (iykyk). The second is Terry Gou. And Tim Cook is the third.

Gou’s impact was already apparent in the mid-1990s as he connected foreign clients with Chinese workers in the former farmlands of Shenzhen. He was the ultimate salesman, middleman, and logistics chief. Cook signed on.

As Apple factories around the world were shuttered, and contracts started disappearing from Japanese and Korean factories, Cook went all-in on China. By the early 2000s, Foxconn was China’s biggest exporter and a big chunk of that was for Apple.

By 2010, Apple was Foxconn’s single-largest customer. Through its partnership with mostly Taiwanese factories in China, Apple fed, trained, and nurtured more Chinese people than any non-government enterprise on the planet. The continuous income stream Apple provided became an important foundation for the technology-manufacturing hub that China enjoys today.

Cook’s Compromise

But it also made Apple overly reliant on a single country, one that is increasingly at odds with the values of human rights, privacy, and freedom which Apple claims to embrace. To keep China as both a supplier and buyer of its goods, Tim Cook made compromises.

Apple has booted products from its App Store used by pro-democracy movements and bolted shut technological loopholes which allowed people to communicate directly rather than via restricted communications networks. And while industry peers slowly and quietly reduced their China footprint, Apple hung on.

For each of these decisions, the buck stopped at Tim Cook. Such choices have attracted accusations that Apple is a hypocrite, or even downright evil. Maybe, but that’s also a little simplistic.

Consider its 2012 decision to join the Fair Labor Association, an industry group that had counted Nike among its members. There’s no doubt this decision was prompted by the spate of suicides at Foxconn two years prior. Yet, having spent more time in and around Foxconn campuses than most, I can tell you that conditions there are far better than many were led to believe. I can also tell you that trying to paint a more nuanced picture quickly attracts allegations of being an Apple apologist.

Whatever the supposed sins of Apple and Foxconn, the truth is that both companies — and the rest of the iPhone-maker’s suppliers — were quick to embrace change. To seek to do better. That came from Cook.

He backed up his directive for better conditions with the money needed to do so. Foxconn doubled — then tripled — wages and passed the bill to Apple. I have not seen or heard anything to suggest Steve Jobs ever noticed, nor cared about suppliers or their workers. Cook visited regularly and genuinely seemed interested in their plight.

Planet Possible

The biggest impacts from Cook’s leadership span the globe. In 2013 he hired Lisa Jackson, the former head of the US Environmental Protection Agency. Jackson wasn’t brought on board as a marketing ploy or to tick a box, it was a recognition that Apple is truly serious about cleaning up the planet.

In today’s political climate, environmental initiatives are branded mere wokeness. But Apple’s long-term strategies in areas such as pollution control, use of sustainable materials, and connecting to renewable energy are bringing about real change. Because it has the money to pay for these costly measures, both directly and through funding its suppliers, the world now enjoys a cleaner planet than had Apple not even bothered.

Apple’s massive spending power means companies can afford to invest in offshore windfarms and solar arrays, recycle commodity products and rare earths, and develop innovative chemicals and textiles. In a world where caring for others and the planet has been made to seem weak, solutions to protect the environment fell out of favor. But now, at a time when rare earths are hard to come by and energy security is of increasing concern, these strategies seem more relevant than ever.

The Ternus Take

John Ternus, who joined Apple just three years after Cook, looks set to embrace some of his predecessor’s philosophy. In a commencement speech to the graduating class of 2024 at his Almer mater, the University of Pennsylvania, he spoke of “a deep desire to do what we can to protect the environment.”

Yet, he also urged graduates to “build what interests you. Build what excites you. But above all else, build it in a way that aligns with your values.” Like Cook before him, Ternus’s values probably include labor rights and environmental protection. But let’s hope he also embraces human rights and freedom of speech for everyone, not just Apple’s Western hemisphere.

It was always understood that Cook would run Apple very differently to Steve Jobs. Now, upon his retirement, it’s abundantly clear that Tim Cook has indeed built Apple in his own image.

Thanks for reading.

More From Culpium

TSMC’s first-quarter earnings were a display of records across the board: revenue, gross margin, operating profit, net income, wafer shipments, and even ASP. Investors ought to be delighted by what they see.

But I can imagine clients are disappointed.

Not only did TSMC take more of the semiconductor value chain for themselves than ever before, the Taiwanese giant also failed to deliver an upgraded spending forecast for 2026. The best CFO Wendell Huang could offer was to narrow TSMC’s outlook to the “upper end” of the $52 billion to $56 billion capex range it announced in January.

There’s a chance this figure will get a bump later in the year, but the $11.1 billion it spent in 1Q — lower than the $11.5 billion it forked out the prior quarter — means the already backend-loaded spending plan doesn’t leave a lot of room to purchase and install a significantly larger amount of capacity this year.

It’s not all TSMC’s fault. The company needs to secure land, build shells, install utilities, kit out clean rooms, and spin up very complicated equipment. It doesn’t do any of this alone.

Despite the challenges, TSMC wafer shipments grew 28.1% year-over-year in the March quarter, the fastest pace in six years. Sedate growth in recent quarters was due more to supply constraints than demand, so this jump is an indication that new capacity really is coming online.

In addition, TSMC has amended its long-time business model of building new fabs instead of retooling existing ones. Holding onto and operating a chip factory with old equipment and technology is highly profitable because the major cost has already been depreciated. An old fab is a cashcow, a new one is a money sink.

Yet to meet customer needs, TSMC has shuttered 6-inch and 8-inch lines to make room for leading-edge capacity. On paper, that’s not a financially optimal move, but CEO CC Wei likely sees it as a strategically savvy one because it’s the fastest option that he has available to quickly boost supply given his many constraints.

Still, frustration with what many blame as TSMC’s inability or unwillingness to expand has attracted accusations that the Taiwanese company alone is the major speed brake on the world’s AI future. I’ve written before that I think this is untrue and unfair.

Today, I’d note that I haven’t heard a peep out of those same critics with regards to the global shortage of memory chips. Dell CEO and founder Michael Dell was recently cited as saying that “a structure is forming where total memory demand increases by approximately 625 times.” Yikes!

The desire to do an end-run around “the TSMC problem” recently spurred Elon Musk to start moving on plans to get into the chip-fabrication game, and has roped in Intel to help. Details are hazy, but I suspect Musk/Tesla will license technology from Intel and become an important financial backer of Intel’s future expansion plans. Heck, Musk should go all the way and just buy Intel, I say.

Wei seems almost amused at the prospect of Elon Musk soon discovering what he already knows. Something Intel knows, and Samsung knows, and GlobalFoundries knows. And that IBM and Motorola once knew: Making chips is hard.

“There are no shortcuts. The fundamental rules of the foundry game have never changed,” Wei told investors Thursday when asked his thoughts on Tesla and Intel’s plans for Terafab. “They need technology leadership, manufacturing excellence, and customer trust. And most of all service.”

Wei is currently overseeing capacity expansion in four countries across three continents, making him the world’s most preeminent expert on constructing semiconductor factories.

It takes two to three years to build a new fab, and another year or two to ramp up capacity, Wei noted — “no shortcuts.”

Of course, Musk’s move might be a massive headfake, designed to pressure TSMC to expand even quicker so that he can get on with the task of launching AI data centers in space. If so, Wei isn’t buying it, and he’s certainly not about to accelerate TSMC’s growth trajectory to just to stave off a possible loss of orders to Intel and Terafab.

“We repeatedly say that we prepare capacity to meet customers’ demand, not because of our competitor and not because of other considerations,” he said. “The most important one is our customers’ demand, and they work with TSMC so that we plan our capacity and our capital expense.”

Of course, this might be TSMC’s own psyops. The flipside to the “expand now, pay for it later” thesis is that extra industry capacity would give clients more leverage when a slowdown comes, especially since a chipmaker’s capital costs are baked in to its balance sheet and income statement. Seeding doubts into Musk’s mind, Inception style, could pay off bigtime if the world’s richest man later gets cold feet.

Musk’s plan is to scale from an initial output of 100,000 wafers per month to an eventual capacity of one million. Although he didn’t give a timeline, the urgency of his galactic mission suggests that he’d want to do so in under a decade. It took TSMC 37 years to reach the same point. That might make the incumbent chipmaker a bit of a tortoise, but in a few years the hare may learn for himself that there truly are no shortcuts.

Thanks for reading.

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More from Culpium:

• 135.7 points, the highest on record

• +0.2pts for the 7th month of growth, accelerating from +0.1pts in February

• The CASCI cycle is in its 19th month of positive territory (strong or firm)

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Upstream:

Upstream suppliers in semiconductors, materials, and passive components saw the largest jump in growth among all tiers of the supply chain.
This tier still lags the growth levels seen in mid- and downstream.
New capacity is coming online as strong growth among module and final-assembly manufacturers continues to drive demand.

Mid-stream:

Revenue data for companies in the middle of the supply chain shows the strongest growth among all tiers.
This growth rate fell in March, as module makers, mechanical suppliers in racks, draws, & fittings, and cooling systems manufacturers saw their downstream clients absorb inventory while facing shortages from upstream.
March was the 5th month of moderating growth after a brief peak in September and October 2025.

Downstream:

Companies focused on system integration and final assembly of AI servers saw continued strong growth in March, although this growth rate has been flat over the past three months after a solid 4Q 2025.
New supply coming from upstream has helped this growth rate stay high, but tightness in both supply for, and orders of, new products puts this tier in wait-and-see mode.

Capacity:

The business of supplying equipment and constructing facilities remains strong.
Revenue here is more a reflection of contract or phase completion, than actual new sales or orders, so caution is warranted when viewing this tier.
That said, recent data shows this tier has accelerated from a more neutral period experienced in the last half of 2025, indicating that more production capacity is coming online soon.

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CASCI is a weighted index tracking revenue of Taiwanese companies in the AI compute supply chain. Taiwanese companies make up the majority of upstream, mid-stream, and downstream of AI server manufacturing.

Notes for Editors & Analysts:

CASCI is published monthly by Culpium as a service to readers.
Media and analysts are welcome to cite CASCI or the Culpium AI Supply Chain index, with attribution and link. For example, “AI server manufacturing remains strong, according to the latest CASCI report from Culpium.”
Data graphics may be reproduced with credit.
Entire contents of Culpium or CASCI reports may not be reproduced unless a publishing fee is paid.

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Last month I outlined the depth of the AI supply chain, and Taiwan’s unique role at the center of the action. I followed that piece by opening my playbook for tracking the manufacture and sale of AI compute infrastructure, and the components which go into them.

Numerous readers responded with enthusiasm. Many asked why I am not charging for Culpium (because I am dumb!?), and why I provided such a valuable inside-look for free. I appreciate that enthusiasm and support.

Next week, I will go one step further.

On Monday 13th April — at 20:00 Taipei, if you want to set your alarm — I’ll be publishing the first edition of the monthly Culpium AI Supply Chain Index — CASCI.

It’s not well known that my background is in economics and econometrics. My undergrad major was in economics and finance, and I even did an internship at Australia’s Department of Foreign Affairs and Trade where I analyzed Australia’s trade with Europe. I have never formally worked as an economist or statistician because journalism was always going to be my career path. But these analytical tools have been fundamental to the way I dig up ideas and chase down news, and it’s a key feature of Culpium.

CASCI (pr. Kass-key) is the product of many months of data compilation, analysis, and testing. The index has existed in rudimentary form for more than a decade — not for AI specifically, but for my own use to more broadly track the technology supply chain.

Now it’s time to share it with you.

CASCI is built on monthly revenue data released by more than 1,000 Taiwanese publicly listed companies. Many of these businesses are entirely unrelated to AI — bicycles, restaurants, textiles. But a crazy number do have their fingers in the AI pie. I spent an inordinate amount of time going through earnings statements, annual reports, IR calls, client announcements, and media reports to sort the key cast from the background extras.

A core goal of this research was to find those companies which get a significant amount of their revenue from AI and are themselves major players in their own slice of the AI market. The result is a basket of three-dozen companies across the supply chain — upstream, mid-stream, downstream, and capacity.

Almost the entire value chain has been captured. But there are some gaps. Taiwanese companies are not players in the DRAM space, nor are they major suppliers of semiconductor-manufacturing equipment. But thankfully, there are ways to fill these holes.

The contract-assembly business model includes components such as memory at the top line. Hon Hai’s revenue, for example, incorporates the cost of buying DRAM from SK Hynix. So, CASCI does not capture SK Hynix revenue but does include Hon Hai. There are also companies directly correlated to memory, such as those which make memory-controllers.

Capacity capex is similar. A collection of local firms, for example, help TSMC build its fabs and kit them out with utilities like HVAC and wiring. Another subset offer unique production and testing tools that are used in the fabrication and assembly process. They’re not ASML or Tokyo Electron, but they follow the same trends.

So, while there are important companies that are not captured by CASCI, I am confident that I have enough solid proxies to track the AI supply chain without them.

Then there’s the size and scale issue. Hon Hai and TSMC are such huge companies that a revenue or market-cap weighted index would be dominated just by them, meaning that important signals would be lost in the shadows of the giants. But equal-weighting a tiny supplier of circuit-boards alongside a behemoth that spends $50 billion a year wouldn’t make sense either.

So, I dove deep into peer-reviewed research to find the best, most-trusted, and most robust methodologies. This was a nergasmic experience, and it reminded me how much I enjoy the study of economics and its cousin discipline of econometrics. CASCI employs smoothing and weighting techniques already used in major statistical series compiled by the OECD, the US Federal Reserve, and other economic institutions.

The result is an index which aims to capture signals while minimizing noise — which, frankly, is the goal of any statistical measure.

CASCI is different to any other publicly available data release for a few reasons.

• CASCI is real.
  Closely-followed measures such as a Purchasing Managers’ Index (PMI), export orders, and manufacturing activity are based on sentiment surveys of people or samples of data from companies and factories. They’re generally quite robust and consistent, but they’re not built on a full set of numbers. CASCI is based on revenue, a real, complete and actual measure of what companies are doing (and selling).

• CASCI is fast.
  By the time a company reports its quarterly revenue, two-thirds of the signal (the 1st two months of the quarter) is 30-60 days old, and the entire set is around 90 days old. Thanks to Taiwan’s monthly reporting requirements, including the mandate to file by the 10th of each month, CASCI provides the fastest signal possible. A sudden cut in orders or rush of shipments will show up long before quarterly earnings. Furthermore, you can pinpoint the timing of that action to within a few weeks, not months.

• CASCI is global.
  Most robust measures of activity like PMI, exports, and even GDP are country-specific. Because Taiwanese companies must report all of their revenue, including that which comes from overseas factories, their data captures global signals. This is particularly crucial as supply chains fracture and move away from China. Servers built in Houston are captured by CASCI, chips fabbed in Arizona are captured by CASCI, motherboards assembled in Thailand are captured by CASCI.

Going forward, you can expect a monthly CASCI update. It’ll be a single number showing the strength and growth of the AI compute industry — bigger is better — along with a cycle-phase indicator approximating the current place within the broader timeline of the industry’s ebb and flow. I’ll then give you some analysis on the data, what it means, and the current state of play in the AI compute build out.

Companies are required to file by midnight on the 10th of each month — some report just a little later. Therefore, CASCI will come out at 20:00 Taipei the following day, except when these deadlines fall on a weekend or public holiday.

Oh, and it’s free (yeah, I’m dumb).

I hope you find CASCI interesting, insightful, and useful. Look out for the first edition next week.

Thanks for reading

More From Culpium:

Apple is in talks with suppliers to handle a massive dilemma posed by sales of its MacBook Neo that have surpassed expectations, I am told. The question they must answer, and soon, is whether to boost production of the hit laptop, or let their inventory of parts run out, my sources tell me.

MacBook Neo comes in four colors and two configurations, but each model runs on the same processor: the A18 Pro. That’s the chip used in the previous generation’s iPhone 16 Pro, whereas the latest device uses the A19 Pro chip.

But as Ben Thompson at Stratechery astutely observed, the MacBook Neo doesn’t use fresh batches of A18 Pro chips, they’re leftovers from the original production run.

MacBook Neo was designed around useable but leftover chips which would otherwise have been scrapped — remember, Apple are the masters at recycling! But with MacBook Neo being insanely popular, the stock of those binned chips will run out before demand gets satisfied.

Prior to the dilemma posed by this runaway success, Apple was only planning to have suppliers build a new Neo next year, powered by the current generation of binned A19 Pro chips, I am told.

Final assembly of the MacBook Neo is evenly divided between Quanta and Foxconn at factories in Vietnam and China, and the initial plan was to build around 5 to 6 million units before calling it a day, I am told. Right now, suppliers are unsure whether to expect production to continue beyond the original plan.

Leaving all that demand on the table is a painful prospect for Apple executives, but going back for another round would risk killing the sweet profit margins it enjoyed on making a device with “effectively free” chips.

MacBook Neo’s A18 Pro was — past tense — built on TSMC’s 3nm process (N3E). That node is now hugely popular and effectively sold out. Apple could, in theory, beg TSMC CEO CC Wei for a few hot lots — paying a premium to jump the queue — but that would almost certainly kill profits on the low-cost laptop. Alternatively, it could crib from its own wafer allocation originally planned for other devices, but the cost would still be higher than what it paid for the first batch of A18 Pro wafers (and infinitely higher than “free”).

Then there’s the matter of buying more aluminum — whose cost is rising — not to mention DRAM and NAND storage. Apple has a certain amount of power to get aluminum and memory at less-crazy prices than the rest of the industry, but one place their leverage is waning is at TSMC.

Neo Dilemma

Whatever happens — and to be clear, this next part is my analysis not what my sources tell me — Apple’s decision comes with compromises. If they do proceed with a fresh order, including asking TSMC for 10,000 to 30,000 wafers of A18 Pro yielding around 2.3 million to 7 million dies,1 then it will most likely need to raise prices of the MacBook Neo. And it would need to turn off the extra GPU core (of top-bin dies) so all Neos are created equal (theoretically, it could sell a 6-core GPU Neo — call it Neo Ultra — but I don’t see that happening).

One way to do deal with the higher cost would be to kill the cheaper 256GB model ($599) and only sell the one with 512GB of storage ($699). This wouldn’t entirely solve the margin shrink, but may mitigate it. Another approach would be to offer some new colors — I think (Product) RED would work well here — throw in some generous iCloud storage for free, raise the price, and thus preserve the margin.

Right now, the standard iCloud bundle is 5GB free. Giving away 200GB for one year, currently priced at $2.99/month, would follow Apple’s strategy of offering Apple TV+ for those who bought a new device. This is both an incentive to buy the product, and also a way to hook customers in the hope they’ll pay once the free period expires.

But there’s a bigger strategy Apple ought to consider here, and probably are: Getting more consumers hooked on Mac. To date, Mac has largely been an elite product for a niche group of customers by virtue of its high price tag, keeping market share at around 10%. This group is dominated by two categories of user: designers, and coders.

Unfortunately for both, AI threatens to decimate their industries. Furthermore, AI is doing this design & code work in the cloud. High-powered personal computers just aren’t needed when you can do video editing, compile code, or crunch data on a lower-spec laptop with an internet connection.

Coincidentally or deliberately, MacBook Neo is just that: a lower-spec laptop with an internet connection. Concerns that Neo could cannibalize sales of premium devices like MacBook Air and Pro are fully justified. But only in the short-term. In the long run, Neo will likely steal customers from Windows PCs, broadening the Mac ecosystem. As more enterprise software gets run from the cloud, Mac will in turn become a more viable option for corporations otherwise stuck with legacy software tied to Windows.

I also think the Neo will have a shorter replacement cycle, akin to the two-to-three-year interval between iPhone purchases, than the longer five-to-seven-year cycle for items like MacBook Air.

The Stocking Strategy

Twenty years ago, the most common default gift for the festive and back-to-school seasons was the iPod. It was a risk-free item that anyone would love to get, but not so expensive that either the giver or receiver would feel uncomfortable. The iPhone doesn’t quite fit that bill, partially because phones are usually tied to a telecom subscription. The low price of Neo makes it a viable stocking stuffer.

Furthermore, the high price, low supply, and production problems — h/t Lauly Li & Cheng Ting-fang at Nikkei — for the forthcoming iPhone Fold make Apple’s most epic product launch in over a decade unlikely to be an easy win. The Neo, especially given its array of exciting colors, has a much better chance of bringing new buyers into the MacOS ecosystem. But only if Apple ponies up for more components.

Thanks for reading.

More from Culpium:

TSMC has swapped metal cutlery for disposable plastic in its dining rooms, shut a swimming pool, and curtailed access to gymnasium showers in response to Taiwan’s driest winter on record, my sources tell me.

The restrictions were announced and rolled out over the past week after Taiwan’s Water Resources Agency pointed to low water levels at key reservoirs in the nation’s north, I am told. Production is unaffected and the move is a precautionary measure as Taiwan waits out an especially water-starved dry season in the hope that plum rains, usually in May, fill the country’s water stores.

Rainfall in the northern region which includes Hsinchu, location of TSMC’s HQ and eight fabs, has been around 25% below the historic average over the past five months, spurring the WRA to raise its water alert for the region to yellow on March 12, Taiwan’s Central News Agency reported last month. Taichung, in central Taiwan where TSMC also has facilities, had its alert raised to green last week.

Taiwan uses a four-light alert system ranging from green (warning) through yellow (reduced water pressure), orange (reduced water supply), and red (water rationing). Almost 80% of Taiwan’s annual rainfall comes in the months of May through October, with December and January the driest, according to the WRA. As a result, the country starts bracing for shortages by March if the previous wet season was below average and the subsequent dry season failed to make up for the shortfall.

TSMC’s water management protocol, including temporary restrictions for non-manufacturing usage, tends to follow the government’s alert system. While the situation at Taiwan’s northern basins remains healthy, the water level at the Second Baoshan reservoir, a key source of water for the Hsinchu Science Park, is currently below 22%. Low reserves in the center and south are more acute, data shows.

“In response to the light stage of water pressure reduction, TSMC’s facilities within Hsinchu Science Park have put conservation measures in place including: decrease water discharge from the system, reduce facility water consumption, increase wastewater recycling of facilities, improve water production rate of the system, and other relevant water management actions,” TSMC told Culpium in a statement. “We do not expect water conditions to have a substantial impact on operations.”

In reality, TSMC’s measures are unlikely to have much impact on the company’s water usage, which was around 130 million metric tons — 52,000 Olympic-sized swimming pools — in 2024. Instead, the move can be seen as part of the company’s broader conservation strategy and efforts to be a good corporate citizen.

If significant rainfall doesn’t come soon, though, water restrictions could quickly escalate with direct and indirect consequences for production across the country.

More broadly, the current drought highlights the many challenges Taiwanese industry must overcome to keep production humming along.

The US attack on Iran, and subsequent retaliation against Qatar and closing of the Strait of Hormuz caused fears that supply of helium might dry up. Helium, the second-smallest and lightest of chemical elements, is used in chip production as a carrier gas and to cool equipment. Potential shortages have yet to materialize, with Taiwan’s government last week announcing that alternative supply from the US is available.

A bigger issue, though, is Taiwan’s vulnerable electricity supply. As TSMC expands, and Taiwanese manufacturers bring more capacity back from China, energy needs will continue to escalate. That demand is colliding with the government’s shutdown of nuclear power stations and bigger reliance on gas-powered generation.

Last month, however, President Lai Ching-te backed away from his party’s anti-nuclear stance by suggesting the government may be open to restarting Taiwan’s nuclear reactors. Lai’s Democratic Progressive Party has long held a ‘no-nukes’ stance in favor of renewables such as offshore wind, but higher demand from manufacturers plus a rollout of AI data centers has forced his administration to rethink that policy.

Thanks for reading.

More from Culpium:

Cheng Li-wun may be one of the world’s most pivotal politicians. Not forever. Perhaps not for long. But at least for now.

I’ve long held the belief that people don’t care about other people’s domestic politics. Except for the US; everyone cares about US politics. Taiwan’s domestic machinations used to fit that mold of being unimportant to anyone but locals.

Not anymore.

The US, and the entire world, will be impacted by decisions that Taiwanese people, and their leaders, make over the next decade. That’s because the country sits uniquely at the nexus of supply chains, great-power rivalry, shifting trade routes, and energy demand.

What may look like mere domestic affairs will impact Taiwan’s ability to shape its own future, and as a result the future of global manufacturing. And that’s before considering outward-facing policies such as industrial development, foreign relations, and military procurement.

If things go awry in Taiwan, it won’t just be the world’s supply of leading-edge chips that go up in smoke. The flow of AI servers will grind to a halt, and the management & logistics of industries spanning shipping, shoes, golf clubs, plastics, bicycles, yoga pants, and military hardware will get stuck. It’ll be like the Ever Given blocking the river of global trade, with no tugboat in sight.

That’s why Cheng’s role is more important than perhaps she herself realises. Her power comes not from who she is as a person, but whom she represents: Taiwan’s Kuomintang.

Rich Party, Poor Party

Once the world’s richest political party, the KMT’s heft has atrophied over the past quarter century. It went from being the authoritarian leader of a single-party state to leaning on an upstart political party just to gain slim control over Taiwan’s legislature.

By the end of the current presidential term in 2028, the KMT will have held the top executive role for just eight years since the turn of the century. The incumbent Democratic Progressive Party, in office since 2016, will have been in power for the other twenty.

A graduate of the prestigious National Taiwan University Law School, Cheng Li-wun went on to postgraduate studies at Temple University in the US before earning a Master’s Degree at Cambridge University.

The most important line on her resume, though, came just a few months ago when she was elected Chair of the KMT.

Now Cheng has the task of herding the cats of the KMT within the legislature and the party at large. The direction the KMT takes matters a lot because not only does it offer the only viable alternative to the policies of the DPP, but it signals to the outside world what possible paths the country itself might take.

The KMT needs to give the Taiwanese people a good reason to put them back in power, but it cannot ignore the reality that the world is watching how it manages relations between two great powers.

A comment from Cheng to the Taiwan Foreign Correspondents’ Club this week encapsulates that tension.

“The Kuomintang ​has long maintained very good relations with the United States. This will not impact our efforts to improve relations with the mainland,” Cheng said.

On the surface, this looks like great diplomacy. We’re everybody’s friend, she seems to be saying, so we’re going to play both sides.

But it’s also either woefully naive, or a show of political cunning. No matter how much Taiwan, or anyone else, wants to try to be besties with both Beijing and Washington, the reality is far different.

On the surface, for matters that don’t actually matter, this may be possible. For substantive issues it’s entirely impossible.

When Washington puts pressure on Taiwan to boost military procurement, Beijing will put even more pressure on Taipei not to. If Beijing urges Taiwanese to invest more in Chinese industry, including chip fabs, you can be sure Washington will step in. In this neo Cold War, those who try to sit on the fence are sure to fall off.

Yet, actually sitting on the fence and merely appearing to sit on the fence are two different things. Right now Cheng is not in power, as she was at pains to point out to that crowd of foreign journalists and diplomats on Monday, so she has plenty of freedom to try and placate both sides. This tactic may not appease both Bejing and Washington, but it won’t upset them either.

More importantly, she gets to play to all sides of Taiwan’s political spectrum — those who are fearful of, and those who are friendly toward, each of China and the US. In so doing, she keeps the KMT’s chances of survival, and possible presidential revival, alive.

And she needs to. Put simply, all three nations — Taiwan, the US, and China — need the KMT to remain a viable force in Taiwan politics.

Failing to do so could lead to disaster, and very possibly World War III. That’s not to mean the KMT is required to actually be in power. In fact, many rightfully fear that the KMT will once again trade the interests of Taiwanese people for closer ties to Beijing. The party moved in that direction once and got swiftly flogged for it. The result was a lost decade for the KMT where there were few guardrails against the DPP’s agenda.

This period commenced in 2014 when the Sunflower Movement popped up in opposition to incumbent president Ma Ying-jeou’s opaque policies on trade and investment with China. It ended when Tsai’s term concluded and her VP Lai Ching-te kept the DPP in power but lost the legislature to a KMT-led coalition.

Tsai’s eight years as president were largely good for the country both domestically and internationally. Wages grew, the people got through Covid without a single lockdown, and more nations started standing up for Taiwan in the international arena. But escalating housing prices and a low birth rate became particularly notable concerns, while longer-term issues like energy and military security were not adequately addressed.

As a result, the KMT’s power has rebounded and the shine has gone off Tsai Ing-wen’s presidency. Whether the KMT or the DPP has the better policies, it’s not at all healthy for a democratically elected leader to govern against a weak and ineffectual opposition. The KMT’s survival also helps ensure the legitimacy of the DPP.

The US also needs the KMT to be viable, despite it not appearing that way right now. The party was once Washington’s bff in Asia. Secretary of State Marco Rubio’s recent comment that the US is “going to unleash Chiang on these people” — meaning Iran’s leaders — was a reference to the 1950s policy (or threat) of using Chiang Kai-shek to attack Mao’s Communists.

Recently, though, the KMT just seems obstructionist. It’s stood in the way of the DPP’s attempt to bolster Taiwan’s military capability while at the same time being a bit too eager to cozy up to Beijing.

On the flipside, Lai Ching-te has offered Washington reason to be wary since he’s eschewed the measured tone taken by his predecessor. I see his recent speeches, including one labeling China a hostile foreign power, more akin to the rhetoric of the DPP’s first president Chen Shui-bian — whom the US didn’t much like. If the KMT can slow its sprint toward Beijing to a mere jog, and embrace the notion that Taiwan probably needs to spend a lot more to boost its national security, then Washington and the KMT can rekindle their friendship.

Saving Face

Then there’s China.

I won’t brook the notion that Taiwan is provoking China to attack. The People’s Republic of China is an independent sovereign nation. Its leaders have full agency over whether or not they launch a military strike against 24 million people who pose no threat. The only reason to do so is to save face. Because allowing Taiwan to be recognized for its own independent sovereignty would be an admission that the CCP failed in its decades long quest to defeat the KMT and extinguish the Republic of China — and thus complete its takeover of “China.”

But it’s naive to believe Beijing will act reasonably. And that’s where the KMT comes in.

For as long as the Chinese Nationalist Party (the literal translation of “Kuomintang”) exists, then the CCP can keep fantasizing about peacefully bringing Taiwan under the PRC umbrella. The death of the KMT, or its lack of viability, removes that pretence. All that would be left is a DPP keen to certify Taiwan’s independence. (And the Taiwan People’s Party, which is barely hanging onto political relevance and would not get away with a swift move toward unification.)

The KMT’s Cheng, while well-educated, is probably not a viable long-term leader of the party as it advances toward the next presidential election. But she fits the role that the KMT needs of her, and which Taipei, Washington and Beijing need someone to play. That is, to moderate the DPP while ensuring Beijing feels it has a friend on the other side of the Taiwan Strait.

Without the KMT, Beijing would have no peaceful political path toward unification. That would in turn reduce the argument made by the CCP’s more moderate factions to hold off on a military solution and continue pursuing political dialogue.

Time and again Cheng makes comments which make me wonder whether she’s politically simplistic, intellectually vapid, or strategically sly.

The Trump Frenemy Playbook

She has indicated that part of her plan to secure peace would be to first visit Chinese leader Xi Jinping before heading to Washington. It feels like she’s taking a leaf from President Trump’s playbook — coddle your nation’s enemies and deprioritize your allies.

”I believe that the other side hopes to resolve cross-strait issues peacefully,” she told the TFCC on Monday. Maybe she’s right, but she’s ignoring the fact the only resolution Beijing seems willing to accept — Taiwan under the PRC’s umbrella — is one which Taiwanese abjectly reject. Meanwhile, Beijing has made clear it’s more than willing to “resolve” the issue by killing an untold number of Taiwanese, who pose no threat to the people of China.

Then there’s the KMT’s grasp of the one issue which truly matters to rest of the world: semiconductors.

At that TFCC event on Monday I asked Cheng whether she thinks the US is hollowing out Taiwan’s chip industry — a growing concern among Taiwanese — and what role she thinks the tech sector should play in securing its national security.

“Taiwan, including its semiconductor industry, must have a global footprint. Therefore, TSMC cannot have all its R&D centers and manufacturing facilities solely in Taiwan. A global presence is essential,” Cheng responded. “Everyone agrees that TSMC’s most advanced and core technologies must remain in Taiwan. This issue can be discussed at a national security level. As for other aspects, a global footprint is necessary.”

That’s a lot of words. But not a lot of substance, and not quite correct. I’ll admit that I’m biased. Technology and semiconductors are my beat, and I asked the question. Yet since technology is so important to Taiwan and the world, I expected the leader of the opposition to have a clearly enunciated policy.

But that’s kind of the role the KMT, and Cheng, is playing right now. They’re offering something for everyone, a buffet of policies, without being pinned down on anything. It’s clear to Taiwanese voters which flavors the KMT favors — less military spending, closer trade and political ties with China, and an eventual path toward Taiwanese being subjects of the PRC. That’s in the KMT’s DNA.

So naturally, those wary of the KMT’s stance on China see Cheng as kowtowing to Beijing. Yet those who believe Taiwan is too enamored with the US feel she’s a little too conciliatory toward Washington.

That sounds oxymoronic in light of my earlier observation that she’s trying to appease all sides. Not necessarily: she’s giving those who want to believe in the KMT something to cling to, betting that these “wannabe believers” outnumber the absolute naysayers who’d never vote KMT anyway.

If true, what this means for war and chips is that the KMT is needed. Perhaps as the party of power, perhaps as the perpetual opposition. But in either role, the KMT can keep admiring the Chinese Emperor’s new clothes — allowing Beijing to keep believing that unification is a possibility.

For as long as that happens, the world will keep enjoying its leading-edge chips, and AI servers, and yoga pants, and bicycles. And peace.

Thanks for reading.

More From Culpium

Last week I published a column explaining the depth of Taiwan’s AI supply chain. Judging by the reaction, that piece was a banger.

It was made possible by a lovely quirk in Taiwan’s securities law: All listed companies are required to publish their monthly sales by the 10th day of the following month. Even better, there’s a very systematic way the data is presented and uploaded. I don’t know of any other country which requires such regular and standardized disclosures.

As a result, Taiwan offers the best, most consistent, and deepest leading indicator of the state of global demand. Not just for AI compute but technology overall, plus a number of traditional industries including footwear, clothing, and even sports equipment. Following this data can offer insights many weeks and even months ahead of official quarterly earnings reports.

As a numbers nerd, this delights me. I’ve enjoyed bathing in this information for many years, and it’s always given me an edge in tracking the global electronics supply chain. There are other quaint Taiwan regulations which are also a boon for those of us seeking more data to analyze.

Today I’m going to explain how to use this data and what to look out for.

Before I start, there’s some rules of thumb worth following:

• Be cautious of month-on-month growth numbers.

• If in doubt, default to YoY growth data.

• Always group January & February together, because Lunar New Year moves annually.

• Some sectors are naturally lumpy, some are not. Learn which is which.

• Rolling 12-month data can be quite helpful.

• Sorting signal from seasonality is both an art and a science, which means it’s valuable.

• Consider converting to USD for exporters in order to remove forex noise.

Meet MOPS

Taiwan’s filings are found through its Market Observation Post System, known locally as mops. It’s in traditional Chinese, but there’s an English language version with the same data. And since both the data and the upload process are standardized there’s zero lag between the time the English and the Chinese versions are posted.

I tend to use the Chinese version for two reasons. I know the tickers of all the companies I usually keep an eye on, but if I see weird data pop up for something that’s not on my radar I’m more likely to know the Chinese name than the English name. Secondly, I’m likely to yield more if I Google the Chinese name rather than the English. However, in the day of Google Translate you’re really not at much of a disadvantage if you can’t read Chinese. But bear in mind, Taiwan follows the ROC dating system. What’s called 2026 in the rest of the world is known as 115年 in Taiwan.

I won’t spend time telling you how to find and retrieve the data, ask your favorite LLM for help. But let me just point out that even if you read zero Chinese, you’ll see the letters “CSV” inside a button at the top center of the page. Click it and see what happens! Unfortunately, the English version doesn’t yet offer an easy CSV download (sad!).

The first thing you’ll notice is that the data shows current month, prior month, same month year prior, and growth stats. This easy presentation of numbers alone is cool and super helpful. But there’s also cumulative year-to-date data. (Note my earlier caution about MoM data). So, March data will already show you first-quarter revenue well before official 1Q earnings are announced. For later quarters, you can just back out latest YTD from YTD of the prior quarter.

That’s why you’ll often see sell-side analysts and financial journalists writing about quarterly revenue well before the official announcement. That tends to kick off a round of analysts updating their earnings models. So, if you truly want to compare results versus estimates you should grab analyst forecasts before the 10th of the month — even better, before the quarter’s end.

Another helpful part of this data dump is that it’s clumped by industry group. From the first screenshot above, you can see that cement companies posted a 4.12% drop in revenue for the year through February. Industry category is based on whichever sector accounts for at least 50% of their operations. A company’s business can sometimes drift over time, and thus may appear on the cusp of a new category, but overall I think this delineation is about right.

Great Granularity

What I particularly love about Taiwan’s equities market categorization is how granular it is. Taiwan is a technology nation. Its economy and stock market reflect that fact, which means there’s delineation between different types of “tech.” There’s 33 categories overall, with eight subcategories of “electronics.” That means we can discern between semiconductors and optoelectronics, or electronic parts & components from electronic products distribution.

But it’s not perfect. Acer, which is a PC brand without factories, is categorized alongside its former manufacturing arm Wistron. As is Asustek and its spinoff Pegatron. Nevertheless, this segregation is good enough for a solid macro view of tech, and it’s pretty easy to build your own custom industry model in a spreadsheet anyway.

Supply chains in any sector are generally divided into upstream, mid-stream and downstream. That’s how I view tech, and I include equipment & capex in a fourth category. Here’s a non-exhaustive sample:

• Upstream — TSMC, UMC, Winbond, Nanya Tech, ASE, Mediatek

• Mid-Stream — Gigabyte, Cooler Master, Delta, Largan, Hon Hai, Mitac

• Downstream — Hon Hai, Wistron, Quanta, Wiwynn, Inventec

• Equipment & Capex — United Integrated Services, Favite

Upstream is where the seed of a product is planted: chips, passive components, chemicals, raw display panels. Mid-stream is where the saplings sprout, and includes modules, system trays, partially completed displays. While downstream is the stout tree, ready to be harvested. The boundaries between them is blurred, and companies often cross these lines. TSMC is most certainly only upstream but Hon Hai does end-to-end.

One peculiarity of Taiwan industry which distinguishes it from Japan and South Korea is that there are few vertically integrated conglomerates. There use to be more a few decades ago, such as a famous maker of rice cookers (iykyk), but today most integration is horizontal (meaning, at upstream, mid-stream or downstream). Foxconn is a rare example. For you and I, this means that tracking monthly sales offers great visibility into various stages of the supply chain. That’s harder to do for, say, Sony or Samsung unless you drill down into their quarterly data to work out which divisions contributed to revenue.

What To Look Out For

You know now what data is available, how to use it, and how to categorize companies by their place in the supply chain.

The final step is putting this all together, and one way to do so is to work backward from product launch.

Nvidia and AMD sell chips and servers, but they don’t make them. Hon Hai, Wistron, and Wiwynn do the servers (and TSMC produces the chips).1 But before these companies can assemble and ship a server to Nvidia, they need to buy the partially assembled parts such as compute trays, power suppliers, and cooling systems. That means the likes of Gigabyte and Cooler Master. But these companies must first get the chips and passive components from TSMC, Winbond, or even fabless companies like Mediatek and Realtek (via TSMC). (Note that Nvidia is a little unique in selling both chips and servers. Also, it doesn’t really sell raw AI chips, it actually ships most of them as modules assembled onto a printed-circuit board.)

Yet, these upstream players can’t do any of this until they’ve built their factories and installed equipment — that means UIS (as well as foreign suppliers like ASML and Applied Materials). They also need to set up ways to test what’s being produced, enter Favite.

As a rule of thumb, the lag to final product availability goes something like this:

• 36 months: Construction commencement to final product (not chip).

• 24 months: Equipment move in.

• 12-18 months: Start of chip production.

• 6-12 months: Packaged chip. Passive & other components.

• 3-6 months: Module assembly.

• 0-6 months: Final assembly.

You can and will find many exceptions to this timeline. New product introduction (NPI) can take a lot longer because everyone in the supply chain is on a learning curve. More complicated products and entirely new categories take longer, consumer electronics can be much shorter. Cars take forever if they’re European, no time at all if they’re Chinese.

Following trends across broader categories as well as subcategories is the bread and butter of supply chain analysis, but the true value is in finding and understanding outliers. The single most-important glitch in the matrix comes from inventory. A product made and shipped is not a product sold — a lot ends up in warehouses. CFOs hate inventory because it’s wasted money, but healthy inventory also means a business development team doesn’t miss out on a sale — CEOs hate opportunity cost. Unfortunately Taiwan monthly data doesn’t track inventory directly, but electronics distributors can be an imperfect proxy. As can export-import data.

That’s all you need to know to start your supply-chain-tracking journey. You can see that Taiwan monthly sales are robust, regular, and reliable. But the data still requires analysis.

Last week I put a poll at the end of my column — There’s a Whole Lot of Taiwanese AI Winners Not Called TSMC — where I ask whether you’d be interested in a regular Taiwan sales roundup. Please take the time to click over to that column and answer just one question. Culpium remains free, so your feedback is most valuable in guiding me toward delivering what you want and find interesting.

Click to Answer One Quick Question.

Remember, if you want to understand where AI is going then earnings numbers from Nvidia, AMD and Google will eventually get you there. But it’ll be a long way behind data on Taiwan monthly sales.

Thanks for reading.

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Everyone knows the name Taiwan Semiconductor Manufacturing Co. It’s the world’s most important company. TSMC’s position atop the global supply chain comes from its ability to do what no other organization in the world can do.

Revenue figures for Taiwanese companies point to another stark fact: the rest of the country is just as important to the global economy as TSMC, and equally irreplaceable.

Sales across the Taiwan Stock Exchange’s almost 1,000 listed stocks climbed 27% in US dollar terms for the first two months of this year. That’s not just a handful of blockbuster companies, but the average across the entire bourse including makers of chips, clothes, chemicals, rice cookers and cars. By comparison, sales for S&P 500 member companies is expected to climb 8.5%.

Taiwan is an export-driven economy. Its biggest companies by revenue are all tier-one exporters, meaning their business comes from selling stuff overseas. If these companies are enjoying massive growth then it’s because their foreign clients are desperately in need of the products they make. A decade ago, the world needed smartphones, a decade prior it was laptop computers. Supply chains for both were dominated by Taiwanese companies — with an assist from Chinese factories.

Right now, the world craves more computing systems to drive the irreversible rollout of artificial intelligence. Once again, it’s Taiwanese businesses that command the end-to-end supply of chips, circuit boards, server racks, cooling systems, and final assembly. Note also that very few Chinese companies are big players in the AI hardware space.

It’s easy to think this is Nvidia’s show, with TSMC and Foxconn merely playing supporting roles.

There’s another way to look at it, though. Nvidia is without a doubt the name to watch in AI compute, but it’s not doing it alone. In reality Nvidia makes nothing. Its chips and servers are the product of an entire ecosystem of companies that own the factories, manage the components, and handle the logistics. They’re mostly Taiwanese.

Heading the list by revenue growth is Wistron and Hon Hai (aka Foxconn) which sold $10.3 billion and $8.4 billion more in product respectively than they did in the first two months of last year. Remember, that’s additional revenue and it comes almost entirely from AI servers and the parts which go into them.

Wistron brought in $16 billion of business over the past two months largely because of fresh AI orders. The Taipei-based company, a spinoff from PC brand Acer, last year opened a new factory 10km from TSMC’s HQ just to make AI servers. Capacity was sold out almost immediately and almost entirely to make systems for Nvidia, the Economic Daily reported. It’s no less astounding that Foxconn, whose revenue topped $260 billion last year, can still manage 25% growth.

“It’s looking like a very good year,” Foxconn Chairman Young Liu told reporters last week. “Consumer electronics is looking very good because of smartphones, and AI is also looking very good.”

Top-line numbers for assemblers, also called contract manufacturers, is a little misunderstood. A large chunk of the $42 billion in revenue Foxconn posted for January and February was the resale of components that clients like Apple, Nvidia, Cisco and Sony ordered.

Although specifics vary from company to company, and product by product, the business model generally entails the client selecting parts and then having the contractor buy those components on its own dime. They’re then assembled into the devices the manufacturer was contracted to make. Sometimes the contractor can mark up the cost, other times it buys at the contracted rate but charges an agreed upon fee per unit of final product. Sometimes it’s a combination of both.

That’s why watching these companies is so useful. When contract manufacturers like Quanta, Hon Hai and Wistron are adding $2.5 billion to $8 billion in revenue per month, you can be sure their clients and the rest of the supply chain are also going strong. The caveat here is that escalating inventories can be a bad sign. These stockpiles are built based on expectations of future demand. They can usually be digested when the market slowly turns, but a one-off shock like the 2009 financial crisis can cause suppliers and assemblers a world of pain.

What makes the Taiwan supply chain run deep is the plethora of companies that provide esoteric and specialized products. Take Favite, a maker of automated optical inspection equipment, which posted $8.9 million in revenue over the past two months. That doesn’t sound like much, but it’s a whole heap more than the $133,000 it posted a year earlier. That sudden boost comes from its privileged position as a supplier of test equipment for TSMC’s future packaging technologies including next-gen Chip-on-Wafer-on-Substrate (CoWoS) and Chip-on-Panel-on-Substrate (CoPoS).

Another AI winner is United Integrated Services, which posted a 64% jump in sales. On paper, Taipei-based UIS is just a construction company, and not really an exporter. But its biggest client is TSMC, and it recently won contracts to manage the development of upcoming N2 wafer and CoWoS packaging fabs in Taiwan, as well as the chipmaker’s Arizona expansion.

Then there’s Winbond and Nanya Tech, among Taiwan’s few surviving memory-chip makers. Although not major suppliers of the high-bandwidth memory that’s fused with Nvidia and AMD GPUs, both companies are winning from higher DRAM prices and increased demand for faster DDR that goes into both AI servers and edge devices.

There are too many fascinating AI-connected suppliers for me to list them all, but if you want some extra reading then I suggest looking up Accton, Gigabyte and HiWin.

Next week I’ll show you how to use Taiwan monthly sales data to track trends in various industries. Make sure you’re subscribed.

Thanks for reading, and please take the time to fill out the survey.

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South Korea’s benchmark equity index had a bad day. Trading in Seoul was suspended for 20 minutes late morning on Wednesday after the KOSPI index dropped to a level that was 8% below the previous day’s close, and it stayed there for at least one minute — triggering a Level 1 Circuit Breaker. Stocks kept sinking after the break, ending 12% lower for the worst daily drop since the global financial crisis of 2008.

The US-Israel war against Iran was cited as the cause: logical. Oil prices shot up after the aerial attack on the major oil producer began on 28 February: of course. South Korea imports most of its energy, thus higher oil prices are bad for its economy: probably. Meanwhile, shares of Korean defense makers like Hanhwa Aerospace have surged since the bombardment began: naturally.1

Iran’s targeting of oil tankers certainly makes the supply of energy less secure, and no electricity means no chips. But US President Donald Trump countered by offering to insure ships and protect them with the might of the US military, so that risk is surely ameliorated.

This from Investing.com’s Ambar Warrick summarize what happened:

”Wednesday’s losses saw the KOSPI wipe out as much as 18% from a record high hit last week. The KOSPI also effectively halved its year-to-date gains to around 20% on Wednesday,” Warrick wrote in a mid-morning update. “Declines were driven chiefly by profit-taking, as investors locked in recent gains and turned largely risk-averse with the outbreak of the U.S.-Iran war over the weekend.”

This one line in particular stood out: The KOSPI also effectively halved its year-to-date gains to around 20%. We’re barely two months into the year and an entire equity index, with a market cap of around $3 trillion, had already advanced 40%.

But none of the above explains why the KOSPI, which is heavily weighted toward memory-chip makers Samsung Electronics and SK Hynix, should plummet. Higher energy prices would have minimal impact on the cost of making memory chips since the biggest expense is the depreciation of their multi-billion dollar fabs. Besides, any increase could easily be passed on to customers such as Nvidia, Apple, and Dell which reportedly have teams camped out in South Korea to secure DRAM supply.

Citrini and the Global Intelligence Crisis

I think a good lens through which to look at this is the one offered by Citrini a few weeks ago in that now infamous report titled “The 2028 Global Intelligence Crisis.”

Citrini laid out a scenario of what the future might look like in the age of AI, it wasn’t a prediction or prescription. It was an idea.

Despite the clear explanation at the very top of the article, AI permabulls were enraged. The most common criticism it attracted was that it was “AI slop,” the internet’s insult du jour — a modern day version of “fake news.” If you don’t like something or it offends your senses, just call it AI slop.

The hate for that piece is also somewhat illogical. If Citrini’s article was the reason why billions of dollars of market cap were wiped off stocks, as has been alleged, then the weakness in the bull case is all the more apparent.

Yet, if the Citrini scenario was actually weak and fanciful, then it defies logic that such “AI slop” could possibly have such an impact on markets. For sure, traders and investors who manage billions of dollars in funds aren’t always perfectly logical, but they’re not stupid either. If Citrini’s apocalyptic scenario was entirely ill-conceived, then it would have just been ignored by most market players. The problem is that the article’s critics are so adamant that they’re smarter than the thousands of people who trade every day that they’re likely to miss the true signs of trouble when they appear.

This week’s sell off in Korean memory stocks offers another chance to check our assumptions about the AI rollout. And it’s a good time to re-examine Citrini’s essay. Here’s Culpium’s summary of Citrini’s “The 2028 Global Intelligence Crisis.”

• Much of modern white-collar work deals with removing friction.

• AI can remove friction more efficiently: booking flights, tax prep.

• AI also makes it easier to deploy new features, removing differentiation.

• No friction plus no differentiation means lower prices and fewer human jobs.

• Reducing the number of humans with salaries also reduces spending power.

• Economic malaise ensues.

Many of the wiser critics drilled down to specific arguments, specific scenarios, and specific case studies to prove their point. That’s exactly the way to approach it, but doesn’t necessarily deliver a knock out blow.

The best critique of the piece came from Ben Thompson at Stratechery, which probably isn’t surprising. Thompson is the father of Aggregation Theory, so naturally he homed in on the example of DoorDash. In his view, Citrini’s idea about the coming collapse of DoorDash shows that the author doesn’t really understand how these platforms work, as laid out in Aggregation Theory. Thompson might be right. He also might be wrong. I guess we’ll know if DoorDash is still around a decade from now (Citrini posited 2028, but that seems a little rushed).

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Whichever way it plays out for DoorDash, Citrini’s broader argument about the possible impact AI may have on white-collar work — especially that which is dedicated to smoothing out frictions and product differentiation — remains worthy of consideration. Unfortunately for the author, they may have chosen the wrong example and argued it in a way that didn’t pass the Ben Thompson smell test.

Bubbles and Being Broadly Right

I think it’s possible to be right more broadly, even if you’re wrong on specifics.

Bubbles are the best example I can think of to illustrate this point. The collapse of the housing bubble almost 20 years ago was obvious in hindsight, but few people predicted it back then and even fewer nailed the timing. Michael Burry, immortalized in Michael Lewis’s book “The Big Short,” predicted the subprime crisis. But the tension over timing is key to the drama, and to the perception of being right.

“I may be early, but i’m not wrong,” Burry is quoted as saying. But few remember the rebuttal he received: “It’s the same thing, Michael.” In the end, Burry’s overarching thesis was right, and his timing was close enough. The bulls got crushed.

Citrini’s broader thesis is that AI will eliminate white-collar jobs, which will in turn decimate the consumer economy upon which the US and many other nations are built.

“The velocity of money flatlined. The human-centric consumer economy, 70% of GDP at the time, withered. We probably could have figured this out sooner if we just asked how much money machines spend on discretionary goods. (Hint: it’s zero.)” — “The 2028 Global Intelligence Crisis”

That’s not a ridiculous notion. Just last week Jack Dorsey laid off 40% of his workforce at Block — 4,000 people in total — and cited AI as the reason. “We're already seeing that the intelligence tools we’re creating and using, paired with smaller and flatter teams, are enabling a new way of working,” Dorsey wrote on Twitter, the very platform he founded (and which Elon Musk renamed X). It’s entirely possible he was using AI as an excuse, not a reason, but that alone proves Citrini’s point: AI will be the cover executives needed to cut staff.

This brings me to the key issue which ties Citrini and the KOSPI together.

Three months ago I argued that the 2000 dot-com bust isn’t quite the right framework from which to view the current AI rollout. Instead, I believe that the development, production, and sale of memory-chips is a more apt example. My reasoning is thus: the cost of building the factories to make the product keeps getting more expensive, yet the product being made is barely distinguishable from rivals (it’s a commodity), and the price is constantly falling. Thus, AI tokens and memory chips are largely similar.

Right now, the price of DRAM chips is rising thanks to the current AI boom which is stealing capacity from traditional uses such as computers and smartphones. This won’t last. In fact, the usual trend of falling ASPs (per bit) will resume because clients demand it and suppliers will be able to deliver it. We’re in a short-term anomally, not long-term stasis. These companies will lose money one day, because the industry is so cyclical that booms always turn to busts.

Normalcy is Bad News

One reason why the KOSPI took a tumble this week is because that return to normal may be closer than we’d previously expected. Not so much because of an immediate cut in demand for DRAM, or even a lowering of the short- to long-term view of the AI rollout, but because what underpins all of this is the broader global economy.

Higher oil prices tend to boost inflation while also lowering economic activity. Data also shows that capital investment suffers during such periods. MSCI this week modeled a scenario where a 35% rise in oil prices resulted in a 13% drop in US equities.

Current massive capex budgets by major technology companies, from Amazon.com and Alphabet, to Meta and Microsoft, is only possible because they’re sitting on legacy cash-cow businesses. These are driven by discretionary spending and monetized through volatile businesses such as ads, software & cloud-services, and e-commerce. This cash needs to keep flowing because the gargantuan sums they’re burning on AI infrastructure is years away from turning a profit. Any threat to that money stream threatens their ability to keep buying expensive Nvidia chips, and the high-bandwidth memory produced by Samsung and SK Hynix.

Yet the Citrini scenario also applies. Capex, once spent, cannot be unspent. AI data centers are a drag on income for five to seven years, at a minimum, and up to 20 years for the building and plumbing. If AI truly does allow a company to do more with fewer staff, then there’s no reason not to do a Dorsey and fire people. Investment figures, one of the components of GDP, could continue to rise even as unemployment climbs — creating what Citrini calls “Ghost GDP.” Additionally, any uncertainty gives executives great cover to cut staff by blaming the economy — indeed, it almost compels them to do so.

On the flipside, however, economic uncertainty also compels executives to be a little more circumspect in how much they spend on future AI infrastructure. Past capex can’t be undone, but future earnings can be saved by rolling back or delaying their pending equipment purchases. I am not saying that’s what’s happening now, in fact I have seen no evidence yet that it is. But a savvy investor would be wise to price it in to their model given the uncertainty surrounding the current Middle East conflict which has already impacted flights and threatened maritime transport.

Ray Dalio and the Arenas of Conflict

There’s a third aspect that’s also worthy of attention. A few weeks ago Ray Dalio made the bold proclamation “It’s Official: The World Order Has Broken Down.” While he was being a little hyperbolic, Dalio’s comment on Twitter was actually a distillation of statements made by world leaders at the Munich Security Conference. His claim wasn’t entirely clickbait.

Dalio then followed up by generously copy-pasting Chapter 6 of his best-selling book “Principles for Dealing with the Changing World Order.” That chapter, titled “The Big Cycle of External Order and Disorder” is a walk through the history of the causes of war and strife, in which he presents his thesis on the five major kinds of fights between countries, and how each are connected to the other.

One particular passage struck me, and I’m reminded of it today as I look at Citrini’s thesis and the KOSPI’s plunge:

“The United States and China are in an economic war that could conceivably evolve into a military war,” Ray Dalio wrote, noting that technology is among the arenas in which nations fight. And he goes onto observe, and perhaps warn, that “protecting one’s wealth in times of war is difficult.”

The AI permabulls are convinced that artificial intelligence will upend the world, and they may be right. If they’re wrong, then being cautious about massive capex and continued demand for expensive GPUs and precious memory chips is warranted. If they’re correct, however, the possibility of this technology upending economies and nations is also high.

Surely, then, there’s wisdom in “protecting one’s wealth” in this time of war.

Thanks for reading.

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TSMC is urging clients to apply for N2 production allocation as far out as the second quarter of 2027, with large allotments of capacity close to sold out for the next two years, my sources tell me. Bookings are still available but this lengthening lead time, which may soon extend to six quarters, is making it hard for chip designers to commit to their own roadmaps, I am told.

Equity analysts, including those at Deutsche Bank and JPMorgan, previously noted that N3 is sold out well into 2027, according to media reports from WallStreet CN, Digitimes, and the Commercial Times.

Culpium is the first to report that N2 is now close to facing the same level of capacity constraint well into next year and beyond. TSMC’s N3 node was launched in 2022 with revenue from the technology almost doubling last year to $25 billion. N2, on the other hand, hit volume production only in the past six months. Apple is the first customer and is initially using the node for chips that will go into its upcoming MacBook, I am told.

A newer variant called N2P will offer a 5% performance bump for the same power and will be in volume production in 2H 2026, as will TSMC’s A16 node focused on high-performance computing chips, CEO CC Wei told investors last month.

Competition for TSMC production has long been a part of working with the world’s largest chipmaker. This struggle came to light during the Covid pandemic when car makers were caught short. The current situation, however, is more acute than ever, I am told. A confluence of factors is exacerbating the challenge, including the larger footprint taken up by AI GPUs, their higher price tag making clients less likely to baulk at the escalating rates being charged by TSMC, and the AI arms race being waged by startups and hyperscalers.

Culpium last month reported exclusive details of the changing leaderboard among TSMC’s largest clients — Apple and Nvidia — with sources telling me that the Green Machine likely pipped the Cupertino Cult as the foundry’s largest customer for at least a few quarters of 2025.

That’s indeed what happened — across the entire year. Data recently published by TSMC shows that Nvidia’s procurement more than doubled in 2025 to $23.3 billion, ahead of Apple’s at $20.7 billion, according to Culpium analysis.

TSMC typically asks clients to notify them how many wafers will be needed each quarter, the company then plans its capacity allocation and lets customers know what they’ll get. Buyers are then asked to pay for that capacity, locking in production schedules.

This latter deadline is now around six months out from the start of manufacturing, with fabrication and packaging then taking around four to six months. That means chip designers must decide on their needs as much as 12 months before they’d take delivery of the chips.

There are exceptions to this timeline, including last-minute requests called hot lots (aka hot runs) which attract large premiums and aren’t guaranteed. But these capacity constraints and lengthening lead times are causing growing uncertainty among downstream clients in computing, networking, and consumer electronics.

Nvidia this week gave hints about its own appetite — past, present and future — after reporting a 65% rise in full-year revenue to $216 billion.

“We believe we have inventory and supply commitments in place to address future demand, including shipments extending into calendar 2027,” CFO Colette Kress told investors during Nvidia’s investor call on Wednesday. “While we don’t use the term ‘sold out’ for 2027 yet, our visibility is better than it has ever been. Our customers are giving us multi-year roadmaps because they know that if they don’t secure the capacity now, they will be left behind in the agentic AI race.”

To ameliorate the problem, TSMC announced last month it will include N3 at its facility in Kumamoto, Japan. Last year, it added a third phase at Arizona which will make wafers at N2 and A16. That new fab is expected to hit volume production at the end of the decade. More factories are planned for the US site, as well as new facilities being added in Taiwan.

Thanks for reading.

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