TSMC says efforts to rebuild US semiconductor industry are doomed to fail

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Apple supplier TSMC believes that US efforts to rebuild chip manufacturing at home are doomed to fail, as it finds itself caught between China and the United States in a tech cold war.

TSMC
TSMC


Morris Chang founded TSMC in 1987 when Taiwan recruited him from the US to help build an electronics industry. The contract manufacturer rose to become the top chipmaker in the world, commanding 20% of global wafer fabrication and 92% of advanced chip capacity.

US share in global chip manufacturing shrunk from 37% in 1990 to 12% in 2020, but the country wants to regain its dominance. In particular, US Department of Defense is worried that the country's dependence on Taiwan could put chip supplies for the defense industry at risk.

In response, President Biden signed the CHIPS Act into law on August 9, 2022. It provides over $52 billion to help US companies build new semiconductor facilities, fund research, and expand existing manufacturing.

Taiwan isn't happy about the move because it sees its semiconductor dominance as a "silicon shield." The government believes that if China were to attack the country, the US would come to its aid to prevent China from seizing the industry.

Market share for countries in semiconductor manufacturing
Market share for countries in semiconductor manufacturing


When US House Speaker Nancy Pelosi visited Taiwan in August, she met with Morris Chang and Mark Liu, chair of TSMC. Chang told Pelosi that Washington's efforts to rebuild its chip manufacturing were doomed to fail, according to Taiwan's Financial Times.

But the United States may not have much choice. Analysts at investment bank Credit Suisse have estimated that if the world loses access to Taiwan's chip plants, it will disrupt the production for everything from computers to cars.

Apple would be impacted too, as it relies heavily on TSMC for chip production. While it has expanded some of its manufacturing to other countries such as Vietnam and India, those moves do not diversify Apple's chip supply at all.

Still, TSMC remains a major supplier for Apple and other companies, and its future between the US and China is uncertain.

"The monopoly in semiconductor production creates instability," said Brad Martin, director of the National Security Supply Chain Institute at the Rand Corporation. "If the US is faced with a need to make a decision between protecting its economy and defending Taiwan, that starts to become a very stark decision."

TSMC has made some efforts to help the US by planning a semiconductor facility in Arizona, the first such chip facility it will develop outside of its home country. TSMC expects it will reach its production start in early 2024.

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Comments

  • Reply 1 of 78
    DAalsethDAalseth Posts: 2,829member
    The government believes that if China were to attack the country, the US would come to its aid to prevent China from seizing the industry.

    Except if China attacks Taiwan, win or lose the Taiwanese semiconductor industry would be obliterated. That’s the reality that the CHIPS Act is addressing.
    ravnorodomjas99bloggerblogwilliamlondonllama
  • Reply 2 of 78
    Nothing is impossible save for the mindset which preaches that it is so!   Let’s face it, Taiwan is in a bad position militarily, politically and economically!  A mere blockade of Taiwan will shut down their semi-conductor industry without s shot having been fired!  There needs to be redundancy in the semi-conductor industry! 
    williamlondon
  • Reply 3 of 78
    rob53rob53 Posts: 3,261member
    It has never made sense for China to attack the USA. They own too many business in the US and just about everything we buy is made in China so they'd be killing themselves by killing that market. Furthermore, the US doesn't have the labor force (willing to work) necessary to build the number of products China sells to us. If you think prices are high now, think about how much everything would cost if we brought back manufacturing to the US. The USA is a consumer and farming country, not a large scale manufacturing country. Sure, there are some large scale manufacturing companies but they are dwarfed by what China (and the far east) provides. 
    Oferwilliamlondon
  • Reply 4 of 78
    FuzzyDiceFuzzyDice Posts: 9unconfirmed, member
    Intel believes it can catch TSMC by 2025 and surpass them shortly after that.  So, this might just be Taiwan fear-mongering because they do not want to lose their grip on this market.
    williamlondon
  • Reply 5 of 78
    crowleycrowley Posts: 10,453member
  • Reply 6 of 78
    thttht Posts: 5,529member
    rob53 said:
    It has never made sense for China to attack the USA. They own too many business in the US and just about everything we buy is made in China so they'd be killing themselves by killing that market. Furthermore, the US doesn't have the labor force (willing to work) necessary to build the number of products China sells to us. If you think prices are high now, think about how much everything would cost if we brought back manufacturing to the US. The USA is a consumer and farming country, not a large scale manufacturing country. Sure, there are some large scale manufacturing companies but they are dwarfed by what China (and the far east) provides. 
    Unfortunately, many societies and nations are often led by irrational, narcissistic people. It doesn't take much to spiral towards badness. The USA isn't free of this either. The double unfortunately is that it is going get worse, not better. South and southeast Asia where many manufacturing assets are moving to are under threat of being destabilized.

    TSMC has its own self interest to consider, but semiconductors are strategic national assets. If the outcome is more expensive electronics versus the potential of have none or an economy grinding to a halt if something happens to Taiwan, it's pretty obvious what course of action should be taken. The IRA and the CHIPS act should have 5x to 10x the money. Batteries, solar panels, semiconductors, recycling, electrification, energy efficiency, energy storage, environment preservation and restoration, who knows what else. It's a race now. Not against any one country, but really against ourselves.
    OferdrdaviddewmePatchyThePirateV.3h4y3s
  • Reply 7 of 78
    US already has a fabrication factory called Intel. Apple and Intel just don't get along. Where's that $52 billion from government is going to go? Intel or TSMC in Arizona? There is no other company in the US is capable of producing CPU chips.
    williamlondonAlex_V
  • Reply 8 of 78
    williamhwilliamh Posts: 1,036member
    The NPR Planet Money podcast on October 7 is about this subject and how it got this way.  I am not a big fan of Planet Money but this is worthwhile if the subject interests you.  https://www.npr.org/2022/10/07/1127595393/taiwan-miracle-semiconductor-silicon-shield-china

    I'll add that the story is really interesting and it involves both Samsung and Nintendo.

    edited October 2022
  • Reply 9 of 78
    williamhwilliamh Posts: 1,036member
    rob53 said:
    It has never made sense for China to attack the USA. They own too many business in the US and just about everything we buy is made in China so they'd be killing themselves by killing that market. Furthermore, the US doesn't have the labor force (willing to work) necessary to build the number of products China sells to us. If you think prices are high now, think about how much everything would cost if we brought back manufacturing to the US. The USA is a consumer and farming country, not a large scale manufacturing country. Sure, there are some large scale manufacturing companies but they are dwarfed by what China (and the far east) provides. 

    It didn't make a lot of sense for Russia to attack Ukraine.  You never know what will enter a dictator's head. One thing for sure is that the Chinese government is aware of how much it would cost to bring manufacturing back to the US and they may think (correctly?) that we won't do anything about a Taiwan invasion because of that.  They may also calculate that the damage to their own economy is an acceptable cost.  It's not like they're concerned about the next election.
    williamlondondewmethth4y3s
  • Reply 10 of 78
    Can anyone figure out the lunacy of having strategic export laws on computers but allowing critical industries like chip foundries to be offshored? The most advanced chip manufacturing should always be in the US, you offshore commodities, not critically strategic components. You could see this coming 30 years ago, and somehow we’re here thanks to decades of unregulated corporate greed and government incompetence — and this is one area where I will happily lump both sides together.
    danoxwilliamlondonllamah4y3s
  • Reply 11 of 78
    The U.S. should partner with TSMC. and still ramp up production efforts at home. 

    Taiwan is correct about their tech being motive for the USA to protect them from evil government takeovers like those constantly being threatened by China. 

    But that doesn’t mean the US can’t get something going at home as well. 
  • Reply 12 of 78
    DAalsethDAalseth Posts: 2,829member
    tht said:
    rob53 said:
    It has never made sense for China to attack the USA. They own too many business in the US and just about everything we buy is made in China so they'd be killing themselves by killing that market. Furthermore, the US doesn't have the labor force (willing to work) necessary to build the number of products China sells to us. If you think prices are high now, think about how much everything would cost if we brought back manufacturing to the US. The USA is a consumer and farming country, not a large scale manufacturing country. Sure, there are some large scale manufacturing companies but they are dwarfed by what China (and the far east) provides. 
    Unfortunately, many societies and nations are often led by irrational, narcissistic people. It doesn't take much to spiral towards badness. 
    Yes, not picking out any particular country or political system, in general all societies face this. The people who most want power, and are best able to achieve power are often the people least suited to wisely using that power. Often the last ones who should be in charge. 
    roundaboutnow
  • Reply 13 of 78
    crowley said:
    Why is it misleading? The numbers are the same only the chart type is different.

    rob53 said:
    ...If you think prices are high now, think about how much everything would cost if we brought back manufacturing to the US. The USA is a consumer and farming country, not a large scale manufacturing country. Sure, there are some large scale manufacturing companies but they are dwarfed by what China (and the far east) provides. 
    This is often misunderstood. Yes labor costs in the US are generally much higher than China and Taiwan, but those rate differentials do not impact the tech chip manufacturing industry much. Top chip plants along with their equipment are priceless and require high quality workers who demand top dollar. They are the type of workers that are sought after by top US companies and they'll gladly bend over backwards to recruit them. They're not stuffing teddy bears or stitching leather.
    edited October 2022 tmaywilliamlondonh4y3s
  • Reply 14 of 78
    crowleycrowley Posts: 10,453member
    crowley said:
    Why is it misleading? The numbers are the same only the chart type is different.
    They are not.  See the link provided.  Or just read the numbers that are clearly not the same.  Hell the timescale isn't even the same so you should really pay more attention before leaning in.
    edited October 2022 bloggerblog
  • Reply 15 of 78
    Part of the reason TSM is so successful … is that they have built a massive supply chain in Taiwan of tiny companies specializing in pushing semi fabrication tech forward in one particular way. Think not of a bunch of “minnows”,  but a bunch of “piranhas” who are hyper competitive in delivering technological excellence in one tiny part of the process. Add all of this up and TSM leverages it for their final result and our now “World Class” and ahead of Intel.

    Read, “The End of the World is just the Beginning, Peter Zeihan” (June/2022).

    It’s not enough for TSM to built a final fabrication facility in the USA, they need to build “the entire supply chain in the USA.”

    The CCP is acting belligerent. They could decide to be a “team player”, but no! They are the greatest benefactor of US led Bretton Woods and for what? To bite the US hand that they’ve been feeding from?

    Fuck the CCP! Long live the Chinese people. The future looks bleak for them!

     :/ 





    tmay
  • Reply 16 of 78
    danoxdanox Posts: 3,041member
    FuzzyDice said:
    Intel believes it can catch TSMC by 2025 and surpass them shortly after that.  So, this might just be Taiwan fear-mongering because they do not want to lose their grip on this market.
    Intel catching up? they have been disrupted, without a in house OS going forward they are but bit player.
  • Reply 17 of 78
    danoxdanox Posts: 3,041member
    Can anyone figure out the lunacy of having strategic export laws on computers but allowing critical industries like chip foundries to be offshored? The most advanced chip manufacturing should always be in the US, you offshore commodities, not critically strategic components. You could see this coming 30 years ago, and somehow we’re here thanks to decades of unregulated corporate greed and government incompetence — and this is one area where I will happily lump both sides together.
    Don’t give content companies, or Jerry Jones and the NFL billions, move that money over and pay the salaries of the future on onshore chip manufacturing facilities/personnel that would seem to be a higher priority? Regain focus as a tech company.
    edited October 2022
  • Reply 18 of 78
    thttht Posts: 5,529member
    US already has a fabrication factory called Intel. Apple and Intel just don't get along. Where's that $52 billion from government is going to go? Intel or TSMC in Arizona? There is no other company in the US is capable of producing CPU chips.
    Intel wasn't in the business of being a merchant chip fab for the vast majority of its existence. The fabs that they have, basically the best fabs in the world until 2018, were designed and built to fab Intel chips. They probably need billions to just be able to fab non-Intel designs. Fabless chip vendors (AMD, Apple, Qualcomm, Broadcomm, Texas Instruments, Infineon, etc) were essentially left to go to Samsung, TSMC, GlobalFoundries, etc.

    30 years ago, chip fab was cheap enough for smaller companies to have their fabs. A lot of people say Moore's Law this and Moore's Law that, where chip transistor densities double every 18 to 24 months due to economics of computing life cycles, but what's never said is that Moore also said the cost of designing and building a chip fab doubles every 18 to 24 months too. The cost to build a TSMC N3 fab is 2x the cost to build a TSMC N5 fab. A TSMC N3 fab is somewhere around a 20b USD.

    As long as this cost of building advanced chip fabs is exponential like this, it sets up a Highlander situation where there can only be one. Only 2 or 3 companies will have enough money to get to 3nm. Maybe 1 or 2 companies for 2nm. To fund the next fab, it means you need to capture more and more of the market or create more markets to sell chips into in order to fund the next round. TSMC winning the smartphone chip vendor war, with Apple winning the revenue and profit game funding them, meant they could outspend Intel in getting to the next fab node.

    What happens at 2nm, or 1.5nm or 1.2nm? Fabs at that level will probably cost 50b to 100b. Only huge nation-state economies will be afford it. So, the CHIPS act is a kind of a precursor to what will eventually happen. What the company is a US company or a foreign company really doesn't matter too much. It's really having a closed cycle capability locally that's free of global economic "headwinds" as it were.
    tmayravnorodomh4y3sAlex_V
  • Reply 19 of 78
    crowley said:
    crowley said:
    Why is it misleading? The numbers are the same only the chart type is different.
    They are not.  See the link provided.  Or just read the numbers that are clearly not the same.  Hell the timescale isn't even the same so you should really pay more attention before leaning in.
    A different timeline does not imply misleading. In the stacked area line chart the US in 2015 was at 12.6% which is slightly larger than 2020, and that correlates well with the 12% in AI's chart. Same goes for the US in 1995 vs 1990.
  • Reply 20 of 78
    crowleycrowley Posts: 10,453member
    crowley said:
    crowley said:
    Why is it misleading? The numbers are the same only the chart type is different.
    They are not.  See the link provided.  Or just read the numbers that are clearly not the same.  Hell the timescale isn't even the same so you should really pay more attention before leaning in.
    A different timeline does not imply misleading. In the stacked area line chart the US in 2015 was at 12.6% which is slightly larger than 2020, and that correlates well with the 12% in AI's chart. Same goes for the US in 1995 vs 1990.
    And the EU?  And Japan?  

    They're clearly different, and the link will tell you why.  Stop wasting my time.
    edited October 2022 muthuk_vanalingam
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