Taiwan Semiconductor Manufacturing Co (TSMC) on Friday announced that it will build its most advanced chip manufacturing facility at the Tainan Science Park, which is part of the Southern Taiwan Science Park.
TSMC has yet to disclose the financial details of the 3-nanometer foundry in Tainan, but local media, citing the Ministry of Science and Technology, have reported that the investment is worth about NT$500 billion (US$16.5 billion), with a tentative timeframe of starting commercial operations in 2022.
Aiming to lead the industry, TSMC has been investing heavily in next-generation technologies to expand its business and secure bigger orders from top fabless customers such as Apple and Qualcomm.
The company is set to begin volume production of 10-nanometer chips this year and plans to start mass production of 7-nanometer chips next year, followed by 5-nanometer chips in 2020, as it aims to upgrade its node technology by one generation every two years. The 3-nanometer chips, once volume production begins in 2022, are to find applications for artificial intelligence, cloud computing and 5G mobile communications.
The company’s announcement ended months of speculation that it might choose the US as a location for its new facility, given land, water and electricity shortages in Taiwan, as well as transportation difficulties. Its selection of the science park shows that the company’s competitive advantage depends on Taiwan’s “cluster effect” and supply chains.
The site’s selection followed remarks on Sept. 23 by company chairman Morris Chang (張忠謀) that TSMC’s production and research and development (R&D) base would remain in the nation.
At a time when many Taiwanese worry about the nation’s investment prospects, TSMC’s move is a vote of confidence in Taiwan and is crucial to the nation’s economy.
With TSMC’s growing significance in the global semiconductor and components supply chains, it might avoid any delays in the fab construction, as government agencies are likely to collaborate with TSMC — meeting the firm’s planning demands, shortening the time needed to process environmental impact assessments and ensuring that it has stable water and power supplies.
However, the government should do these things not just for TSMC, as many other businesses have called on the government to allocate land, water and electricity for new investment projects. It must provide a favorable investment environment for all companies.
While TSMC’s investments are expected to attract funds from both domestic and international suppliers — no company would want to miss the opportunity to do business with such an important client — the key to the industry’s long-term development in Taiwan is enabling the domestic production of as much semiconductor equipment as possible, thereby reducing dependence on imported goods and lowering costs.
The government’s low emphasis on import substitution in its industrial policies and local equipment suppliers’ comparatively small-scale operations pose risks to growth in the industry.
Implementation of import substitution and adjustments to industrial structures would maintain the nation’s role as an industrial stronghold while helping keep its exports competitive.
Although it is each company’s responsibility to improve its competitiveness, the government has the responsibility of setting up the regulatory and operational environment, as well as improving administrative efficiency.
The government is aware of the factors that hinder investment in Taiwan, but its problem-solving capabilities have been unsatisfactory.
TSMC’s new investment underscores how the Executive Yuan’s new policy guidelines prioritize increased foreign and domestic investment in Taiwan, but the government should remember that a lack of investment goals and a lack of direction in upgrading industry are even more damaging than administrative inefficiency.
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