Chips Act by America has the objective of moving semiconductor industry located elsewhere into USA. Notably, Taiwan Semiconductor Manufacturing Company (TSMC) is being the prime candidate. Subsequently the company made the decision to relocate part of her production capacity into Arizona. But does this move have any long term viability?
The 1129 acre land in Arizona was earmarked in 2020 and construction began forthwith. The cost of Fabrication plant 1 was estimated as US$ 12 billion about four times higher than what it would cost for the same in Taiwan. The second Fabrication plant is to cost another US$ 16 Billion summing up a cost outlay of US$ 28 Billion compared to the meagre US$ 8 Billion incentive credit TSMC would receive at the end of completion of the plants. No cost overrun would be allowed. Simply the mathematics do not play up to any financial viability at all.
Besides, by the time of completion by 2026, the technology earmarked for the Fabs TSMC plant of five-nanometre process, it passes use by date and cease to be cutting–edge because by that time the semiconductor technology would have moved upscale in leaps and bounds and the USA plants would be no match to compete with Samsung from South Korea.
The understanding is that top-notch professionals of the proposed plants would be Taiwanese and the chance of recruiting and training Americans to work in the senior position as regards to design and manufacturing semiconductors is practically nil. Moreover any management level appointments for Americans would be limited to marketing, distribution and finance. Put it the other way American technocrats are not going to be in the decision making loop. The sad point is that the over-all employment creation level for Americans would not exceed few thousands at the most.
The bottom line is that Taiwan shall remain calling the shots whether in Taiwan or in Arizona. Holding above 50% share in contract chip-making, TSMC remains the world's most valuable semiconductor company. Evidently, TSMC has the world's largest dedicated independent ("pure-play") semiconductor foundry and the current innovation of three-nanometre process which is expected to hit the market means TSMC would be commanding wide range of applications in the area of “ Internet of Things “
For TSMC there are twin geoeconomics risks of relocation: one is that the vital raw materials for her chips are sourced mainly from China, and once US plants are ready to roll out chips using Chinese raw materials she can block TSMC buying any more raw materials. Another risk is China being the biggest consumer of all types of semiconductors she would probably move away from TSMC and turn towards her own Semiconductor Manufacturing International Corporation (SMIC) or towards Samsung where China has excellent back channel relationship.
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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