In the past, TSMC has been opposed to building a factory in the US, believing that the US does not have a complete industrial chain and important talent, but it seems to have changed its mind recently, with TSMC founder Morris Chang confirming that TSMC will build a 3nm fab in the US.
Apple CEO Tim Cook has confirmed that he will buy chips from TSMC ‘s Arizona plant in the future. Qualcomm and Nvidia have said they will do the same.
1. It can shorten the chip delivery time;
2. It can save the extra cost of international logistics.
From the perspective of the United States, TSMC’s establishment of high-end chip factories in the United States can improve the controllable ability of the chip manufacturing industry chain and achieve a complete chip supply chain.
TSMC is speeding up its deployment of U.S. plants
TSMC’s ability to make money is obvious, monopolizing more than 80 percent of the industry’s profits. TSMC makes more than half of the world’s chips. But to make more money, TSMC has to do something.
Due to US regulations, TSMC has lost its cooperation with its second-largest customer. Without this customer order, TSMC will face a huge impact. However, with the support of American customers, TSMC’s orders continued to flow, not only without influence but also significantly increased.
It also makes TSMC more dependent on U.S. customers, and if it loses these orders, TSMC will lose at least 60% of its revenue.
However, chip demand is declining, and customer order demand in the United States is also decreasing. Industry sources say that TSMC’s overall capacity utilization rate will decline to 80% in the first half of next year, and 5nm and 4nm will gradually reduce capacity.
In the first half of this year, TSMC experienced the impact of declining capacity utilization, especially on 7nm orders. In response to customers canceling orders, TSMC encouraged staff to take more holidays and cut capital expenditure to $36 billion, down $8 billion from a planned $44 billion.
In these cases, all TSMC needs to do is secure the revenue stream, and instead of waiting for customers to come to the door, it is easier to get orders by building factories on someone else’s doorstep. So TSMC accelerated the layout of its U.S. plants.
The first 300 employees have been dispatched to the United States
TSMC is faced with problems such as an incomplete industrial chain and a lack of talent when building factories in the United States. It may be too late to purchase equipment from suppliers around the world temporarily, which will also consume more capital expenditure.
So TSMC moved equipment from its headquarters to the United States. Capacity utilization in the headquarters area was down anyway, and some production lines were empty. It simply shipped the idle equipment to the American plant, which saved money and could get the equipment in place quickly. Once the equipment was available, there was also personnel to operate it, so the first 300 key employees were sent to the United States by TSMC.
Confirm the plan of the 3nm chip plant
In May 2020, TSMC announced plans to build a factory in the US, investing $12 billion to build a 5nm plant in Arizona, which could be operational as early as 2024.
There has been speculation for years about whether he would decide to build a new plant. After all, TSMC has secured land for six plants in Arizona, and the company has said it would not rule out the possibility.
As expected, Chang confirmed TSMC’s plans to build a 3nm chip plant. Although no detailed investment target has been set, it is confirmed that the 3nm plant will be built near the 5nm plant.
Following this trend, TSMC may be able to make full use of the land area of the six plants and eventually form a huge production park, so a 2nm plant is also a possibility.
TSMC’s choice is regrettable
TSMC’s 5nm, 4nm, and other high-end process technologies are world-leading. On the surface, this choice is very good, but for the United States, it is not important who will build the plant, the important thing is to bring advanced process technology guarantee. America needs that kind of technical support. However, after the rise of Intel technology, whether TSMC will be able to maintain its existing partnership in the U.S. market is not clear.
In addition, some netizens in Taiwan said
“Taiwan successfully sold TSMC.”
“TSMC’s choice is regrettable.”
“What will be left when Taiwan’s industries are hollowed out?”
There are two main reasons for this.
Is the US sincere in cooperating with TSMC?
The United States covets TSMC’s technology and talents and tries to guide TSMC to build factories in the United States. After the completion of TSMC’s factories in the United States, it will be easier for the United States to further obtain technical and talent support.
The technology and talent acquired may be provided to Intel on the sly. After all, Intel is the chip giant in the United States, and the United States is more willing to see the rise of Intel’s technology.
Otherwise, the US would not have excluded TSMC from the 2nm cooperation project with Japan, nor would it have focused the most chip subsidies on Intel. Obviously, it is TSMC that pays the most and bears the largest chip cost but gets very little return.
Will TSMC face reduced capacity and brain drain?
TSMC places most of its chip production capacity in Hsinchu Park, the headquarters, where a large number of talents are gathered and top suppliers such as ASML are attracted to build an industrial chain in the local area to enrich the ecology of the park. Only by keeping its own technology in hand can TSMC secure its position as the industry leader.
However, TSMC’s decision to build a factory in the United States will lead to the loss of production capacity and talent. I think you all know that TSMC will transport equipment and employees from the headquarters to the US factory.
This has raised concerns about the loss of capacity and talent, as well as the hollowing out of the headquarters area if TSMC’s core competitive resources move to the United States. Even if TSMC leaves some of its resources, as the US continues to demand that TSMC build new plants, it will move the rest to the US.
In the short term, TSMC can indeed get more support for American orders by building factories in the United States, and major customers such as Apple, Qualcomm, and Nvidia will actively give large orders.
But in the long term, TSMC is likely to lose orders from U.S. customers because Intel is making a big push into contract chip manufacturing, becoming one of TSMC’s biggest U.S. rivals.
Intel plans to become the world’s second-largest contract chipmaker by 2030. Before that, Intel is courting customers from TSMC and had already secured some orders from Mediatek, as well as Nvidia and AMD.
Once Intel’s chip industry rises, how many customer orders will TSMC have left? So is TSMC’s move worth it?