Taiwan Semiconductor Manufacturing Co (TSMC) founder Morris Chang (張忠謀) has repeatedly voiced concern over the weakening cost competitiveness of its US fabs and challenged the US’ “on-shore” policy of building domestic semiconductor capacity. Yet not once has the government said anything, even though the economy is highly dependent on the chip industry.
In the US, the cost of operating a semiconductor factory is at least twice the amount required to operate one in Taiwan, rather than the 50 percent he had previously calculated, Chang said on Thursday last week at a forum arranged by CommonWealth Magazine. He said that he had “underestimated” the gap. Some analysts have estimated that the cost is four times higher. TSMC said it would strive to narrow the gap by applying for as many subsidies as possible.
However, such hopes could be wishful thinking. The US disclosed the details of its Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act earlier this month. Before receiving a cut of the US$52.7 billion fund, chipmakers must meet a host of regulations, such as sharing profits with federal governments and not investing in new semiconductor capacity in China for 10 years. It was unclear if any exceptions would be made.
As long as chip costs go up, chipmakers will pass on the costs to their clients, leading to an increase in the prices of chips and end devices, from smartphones to PCs. As a result, “the ubiquity of chips will either stop, or slow down considerably,” Chang said at the forum.
The government should be concerned about a potential brain drain and the transfer of cutting-edge semiconductor technologies, as TSMC plans to produce 4-nanometer chips in the US next year, and to make 3-nanometer chips in 2026 by doubling its US investments to US$40 billion and building multiple advanced fabs. Three-nanometer chips are the most advanced chips available, and are used in high-performance computing and mobile devices. Three years from now, TSMC’s fabs would be able to make chips just one generation behind what it would be making in Taiwan.
TSMC has sent about 1,000 engineers and their families to the US on chartered flights, and more are to be dispatched to help build advanced chip capacity, as it competes with US technology giants such as Meta Platforms Inc to recruit skilled engineers.
Taiwan’s work culture is an advantage and key to producing chips extremely efficiently, Chang said.
If a piece of equipment breaks down at 1am, Taiwanese technicians fix it by 2am rather than at 9am the next morning, he said.
Most of the engineers going to work at the US fabs have signed a three-year contract with TSMC, many with the aim of acquiring US citizenship. Some engineers are likely to end up working for Intel Corp or another US chip firm after their contract expires. Intel Corp operates chip manufacturing fabs in Arizona and is building more there.
TSMC has dismissed the possibility of losing talent, saying that the number of engineers sent to the US only accounts for a small portion of its workforce. The chipmaker has more than 65,000 workers worldwide.
The semiconductor industry plays a key role in fueling Taiwan’s economy, contributing to 15 percent of the nation’s GDP. To keep the economy rolling, the government needs to protect TSMC and the local semiconductor supply chain from losing their competitive edge.
Retaining skilled talent and keeping the most advanced technology in Taiwan are as important as maintaining a stable supply of water and electricity.
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