Why the world’s largest chipmaker is investing in the US
- Taiwan-based TSMC, the world’s largest chipmaker, announced a $40 billion investment in Arizona last week.
- That’s despite the TSMC founder previously calling US chip production an “expensive exercise in futility.”
- The investment could help achieve geographic diversity and bolster US support.
Last week, Taiwan Semiconductor Manufacturingthe world’s largest chipmaker, announced it would make the increased foreign direct investment in US history. But in the past, company leadership has been skeptical about making chips in the US.
Last Tuesday, TSMC announced that it would be opening of a second factory in Arizona, increasing the company’s investment in the state from $12 billion to $40 billion. However, TSMC founder Morris Chang has argued that the investment is not prudent for either TSMC or the US.
In April, Chang told the Brookings Institution The US push to increase domestic chip production would be “a costly and wasteful exercise in futility,” citing “a lack of manufacturing talent” in the US, as well as its view that “making chips in The US is 50% more expensive than Taiwan.”
United States has taken action a increase domestic chip production because it is Depends on TSMC Taiwan factories for the manufacture of products including cars, PCs, iPhones and washing machines. In case China, which claim the island as your own — invades the island and chip production stops, there is could be trillions of dollars in economic losses. And many experts say that it is It’s just a matter of time before an invasion occurs.
However, experts are skeptical that Arizona factories will increase significantly reduce US dependence on Taiwan when both are completed in 2026, and Chang’s comments suggest the investment could face even more basic challenges.
It may be in TSMC’s self-interest to invest in Arizona, despite the business challenges.
Despite the trade hurdles, there are a few reasons TSMC has decided not just to build the first factory in Arizona, but to add a second.
First, the cost of producing chips in the US might not ultimately be “50% more expensive.”
“It’s more like 15 to 20% more expensive,” Dylan Patel, chief analyst at semiconductor research and consulting firm SemiAnalysis, told Insider. “The United States will probably subsidize that penalty, so the cost differential will actually not be much.”
The factories will be partially subsidized by the US government through the CHIPS and Science Acta package approved in August that provided $52 billion to boost US semiconductor chip production.
And even if it’s more expensive to produce, Patel says TSMC customers will be “happy to pay a little more” to ensure supply chain diversitysomething that many companies are focused on Given the supply chain challenges of the last years.
This includes Apple, TSMC biggest customer which represented 26% of their income last year. Apple CEO Tim Cook has already said that the company will be the largest customer of the factories once they connect.
“TSMC’s leadership sees the benefit of having some geographic diversity in its operations,” Martijn Rasser, a former CIA officer who is now a security and technology expert at the Center for a New American Security, told Insider, “particularly when it’s strongly courted by the governments of the main economies of the world”.
As Rasser alludes to, currying favor with the US government could be another factor at play.
chang told brookings both in April. while she said it it was not his decision to build the first factory in Arizona, Chang said he did so “at the behest of the United States government.”
And TSMC may have good reason to make sure it’s on good terms with the US.
According to Ben Thompson of Stratecheryif the investment in Arizona “is the price of bolstering US support for Taiwan” in the event of a Chinese invasion, “that’s the best possible insurance policy the company could buy for its operations that really matter, which are intrinsically tied to Taiwan”. .”