AI Vocabulary · 02 AI Infrastructure
What is Foundry?
A company that manufactures chips designed by others. The most advanced AI chips come from very few of them.
Most companies that design chips, including NVIDIA, do not make them. They send their designs to a foundry, a contract manufacturer with the factories and machines to produce chips at the smallest scales. TSMC in Taiwan says it created this pure-play model in which a company only manufactures for customers.
The supply chain is unusually concentrated. Researchers around Girish Sastry and Lennart Heim cite TSMC with about 90 percent of the pure-play foundry market for the most advanced manufacturing processes in 2020, with Samsung making the rest. The machines for the most advanced step, extreme ultraviolet lithography, come from a single company: ASML in the Netherlands.
Why it matters for you
Almost every advanced AI chip passes through a few factories and suppliers. Disruptions there, from natural disasters to trade conflicts, would reach every AI service you use.
Own it
You cannot diversify the chip supply chain, but you can avoid depending on a single AI provider. Keep your data, prompts and workflows portable (vendor lock-in).
Where it comes from
The concentration figures come from Computing Power and the Governance of Artificial Intelligence by Girish Sastry, Lennart Heim and colleagues (February 2024). TSMC's own description is in its Annual Report 2025; it puts its share of what it calls the "Foundry 2.0" industry at 40 percent in 2025, a definition of its own.
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