TSMC's US factory, once referred to by US President Biden as bringing back American manufacturing, has been postponed once again.
Recently, TSMC announced that it will postpone the start of production for the second of its two semiconductor factories in Arizona, USA. The factory originally planned to directly produce 3-nanometer chips in 2026. TSMC Chairman Liu Deyin stated that TSMC's Arizona project, which costs approximately $40 billion, is facing challenges in achieving its production time target.
Several industry insiders have stated in an interview with China Business Daily that TSMC's construction in the United States was not voluntary. TSMC's change in attitude towards the United States is mainly due to the failure of the promised subsidies from the US government and the uncertainty brought about by the US presidential election, which has forced TSMC to postpone production in the United States. However, in the long run, TSMC will not abandon its plan to build a factory in the United States.
Time has been repeatedly delayed
On December 6, 2022, the US government held a grand groundbreaking ceremony for the Arizona chip foundry, including TSMC founder Zhang Zhongmou, Chairman Liu Deyin, President Wei Zhejia, as well as well-known figures in the political and business circles such as US President Biden, Commerce Secretary Raymond, Apple CEO Tim Cook, AMD CEO Su Zifeng, and NVIDIA CEO Huang Renxun.
TSMC began building a chip foundry in Arizona in 2020, with a total cost of $12 billion. According to the plan, the factory will officially operate in 2024, producing chips with a 5nm process. During the ceremony, TSMC also added a spark to the factory by announcing the construction of a second contract factory, with an increase in investment from the initial $12 billion to $40 billion. TSMC also upgraded its planned 5-nanometer production plan for 2024 to 4-nanometer production, and entered 3-nanometer production in 2026.
US President Biden was even more excited to announce on the spot, "Everyone, the manufacturing industry in the United States has returned."
However, the good times did not last long. In July 2023, TSMC announced a delay in the production of its Arizona foundry. Liu Deyin, chairman of TSMC, said: "We are facing some challenges due to the insufficient number of skilled workers for equipment installation in semiconductor level facilities. While we are trying to improve the situation, we have sent experienced technicians from Taiwan, China, China, to train local skilled workers in a short term. We expect that the production plan of 4nm process technology will be postponed to 2025."
In fact, according to Liu Deyin, TSMC's factories in the United States face many challenges. In addition to the shortage of skilled workers, its labor costs are also higher than those in Taiwan, China. Zhang Zhongmou, founder of TSMC, once said that the cost of producing chips in Arizona may be at least 50% higher than that in Taiwan, China.
Entering 2024, TSMC once again announced that it will postpone the start of production for the second of its two semiconductor factories in Arizona, USA. Liu Deyin stated that TSMC now estimates that the mass production of its second factory will be postponed to 2027 or 2028. Bloomberg pointed out that in the longest two years of delay, semiconductor technology is enough to upgrade a generation.
Regarding this, Chief Economist of IPG China, Bai Wenxi, stated that TSMC's shift in attitude towards the United States is primarily due to the relatively high labor costs in the United States, which increases the operating costs of building factories in the United States; Secondly, the talent supply of the United States may not be as sufficient as that of Taiwan, China, which also increases the difficulty of building factories in the United States; In addition, the supply chain and market environment of the United States may not be as perfect as that of Taiwan, China, which also increases the costs and risks of building factories in the United States.
In the eyes of some industry insiders, in addition to cost factors such as land, manpower, and energy, the failure of the US government to implement fiscal subsidies is also one of the reasons for TSMC's attitude change.
The US government introduced the so-called "Chip Act" in 2022, which was supposed to provide approximately $53 billion in subsidies to chip manufacturers expanding in the US. According to the US Department of Commerce, hundreds of companies have submitted applications, but global chip foundry leaders including TSMC and Intel have not received actual subsidies.
Zhang Xiaorong, Dean of the Institute of Deep Technology Research, believes that the US government is unable to quickly fulfill policy commitments, and TSMC may hesitate in its decision to build a factory in the US due to economic considerations.
According to Jiang Han, a senior researcher at Pangu Think Tank, the US government has provided subsidies and tax incentives to TSMC to encourage it to build factories in the US. However, the US government is now more concerned about protecting its domestic semiconductor industry and national security, which may have an impact on TSMC's construction of factories in the US.
Financial commentator Tan Haojun bluntly stated: "TSMC's establishment of a factory in the United States is involuntary in itself, but is constrained by the U.S. government and can only take a passive confrontation. The latest news is that TSMC will build a new factory with the latest technology in Taiwan, China, China, which also shows from another aspect that TSMC does not want to build enterprises using the latest technology on American land. More importantly, the United States is facing the presidential election, and I don't know who can laugh until the end. Once the factory is built in the United States If the US government adopts a forced buyout, TSMC will suffer serious harm
Abandon building a factory in the United States?
Compared to the slow production of foundries in the United States, TSMC's chip foundries in other regions are developing step by step.
Among them, the Kumamoto factory in Japan, which started construction later than the Arizona contract factory, is about to start production. TSMC previously announced that the factory has received funding from the Japanese government. According to the schedule, the opening ceremony will be held on February 24, 2024, and production will begin in April 2024. Mass production will begin in the fourth quarter, with a monthly production capacity of 55000 12 inch wafers.
In Taiwan, China, the most advanced manufacturing plants are also under construction. It is reported that TSMC's 1nm process will be located in the Chiayi Science Park, Taiwan, China, China. TSMC has proposed to the relevant administration a land requirement of 100 hectares, of which 40 hectares will be first set up with advanced packaging plants, and the subsequent 60 hectares will be used as 1nm plant land. It is estimated that TSMC's total investment of 1 nanometer will exceed NT $trillion.
However, in the view of industry insiders, TSMC's repeated delays in the production time of its factories in the United States do not mean that it will give up building factories in the United States, as the US market remains TSMC's main source of revenue and equipment.
From the perspective of TSMC's revenue in the fourth quarter of 2023, during the reporting period, TSMC's revenue in North America accounted for 72%, Asia Pacific accounted for 8%, mainland China accounted for 11%, Europe, the Middle East, and Africa accounted for 4%, and Japan accounted for 5%. The revenue share from North America increased from 69% in the previous quarter to 72%, indicating stronger demand from North American customers.
Jiang Han believes that although facing many challenges and uncertainties, TSMC may still continue to advance its plan to build factories in the United States. TSMC may seek solutions to overcome the challenges of building factories in the United States and achieve its strategic goals. In addition, TSMC may also engage in negotiations with the US government to seek more support and assistance. However, if TSMC is unable to overcome the challenges faced by building a factory in the United States or achieve its strategic goals, it may also consider giving up its plan to build a factory in the United States. In this situation, TSMC may turn to other regions or seek other strategic choices.
Zhang Xiaorong stated that TSMC will not completely abandon its plan to build a factory in the United States. However, considering various factors such as market demand, geopolitics, global competitive landscape, and industrial chain layout, TSMC may choose to delay production in the current situation, in order to exert pressure on the US side.
Bai Wenxi summarized, "From the current situation, TSMC may consider the high cost, high risk, and uncertainty of building factories in the United States, and choose to build factories in more advantageous areas. At the same time, the support of the US government for semiconductors may also affect TSMC's decision to build factories in the United States. Therefore, whether TSMC will abandon its plan to build factories in the United States still needs further observation and evaluation."