Is America Stealing TSMC?

I was sitting down to dinner one night with some friends who know what I do and one of them a Taiwanese said to me my dad said that America is trying to steal tsmc what do you think about that would Taiwan having recently gone through local elections and tsmc Arizona starting up soon in 2024 people in Taiwan have been bringing up this talking point more and more I didn't expect to be talking about tsmc again so soon but I have been hearing this enough times that I felt it was necessary for this short video I want to just say a few thoughts that have been tossing around in my head but first I want to shout out a recent episode of the startup Island Taiwan podcast my guest host this little podcast from time to time interviewing various members of the Taiwan startup community in this wonderful episode I sit with Tim Coy a Taiwan semiconductor historian and we talked about taiwan's early semiconductor days it's wild and worth listening to I'll have a link below before we get started I do want to note that I grew up in America I consider myself an American I also have family ties to Taiwan I have more than a few times mentioned my family home back in Tainan and of course I've lived here in Taiwan for many years take all that as you will I hope this information does not automatically cause you to dismiss what I have to say here if it does well then bye tsmc has been working on this new production facility in Arizona ever since May 2020 when they first announce about it I remember that people were wondering at the time if this was going to be another Fox Con in Wisconsin scenario at least people aren't bringing that up anymore the plan for the facility has always been to produce N5 chips which is very Advanced the most advanced node tsmc has ever tried to bring outside of Taiwan however people back home in Taiwan took comfort in two things first the fact that the Arizona site was quite small about twenty thousand three hundred millimeter Wafers a month this is in comparison to taiwan's four gigafabs which can put out over 100 000 such Wafers a month second the fact that N5 would not be the Leading Edge by the time the factory comes online the presumption being that N3 the next full node step would be up and running by the time the Arizona Factory goes online sometime in 2024. shortly before its Big Tool and ceremony in December tsmc made a bunch of new announcements first that they will bring their N4 process over to Arizona this is an upgrade on the pre-existing N5 line so that sort of makes sense second tsmc is preparing to invest another 28 billion dollars over the next three years to open a second Arizona Factory that Fab will be equipped with N3 N3 has not yet entered high volume production but it should be by 2026 unless something goes horribly intelligently wrong according to the financial times tsmc remains committed to keeping its most advanced nodes in Taiwan tsmc is already planning their N2 and N1 Fabs and the former should be in production by 2026. and third there has been a lot of talk about tsmc expanding out into other countries the company is already building that specialty n28 plant in the Kumamoto prefecture in Japan and then there are other discussions for putting a plan in Germany nothing there has been announced yet but it has been percolating for a long time for a long time tsmc leaders like Morris dung have repeatedly said that the secret to its operational success has been to do everything and certainly its most advanced things in Taiwan all of these new developments are moves away from tsmc's long-running norms and so it's understandable that it makes people in Taiwan nervous which in turn makes it easy to capitalize on their anxieties with a catchy slogan like stealing at the heart of this move is a Confluence between demand and financing tsmc is a commercial entity working in close communication with its customers before most of those customers is Apple which makes up some 25 of total revenue apple is the singular customer Bank rolling the most advanced chip rollouts tsmc can trace its Ascent into the stratosphere to Apple's decision to defect from Samsung and produces chips with tsmc Bloomberg reports that CEO Tim Cook said we have already made a decision to be buying out of a plant in Arizona and this plant in Arizona starts up in 2024 so we've got about two years ahead of us on that one maybe a little less and in Europe I'm sure that we will also Source from Europe as those plans become more apparent if Apple says that they want a source from the U.S and Economics work then tsmc will follow I don't think tsmc should ever risk the chance of Apple deciding to go back to Samsung or defecting to Intel both competitors by the way are building massive new facilities in the United States Samsung has their 17 billion dollar plan out in Taylor Texas and Intel has their massive 20 billion dollar chip plan out in Columbus Ohio these large build outs exist because of the 50 billion dollars in subsidies set aside by the chips Act of 2022 strategically tsmc should take those subsidies if it means less is available to fund Intel and Samsung's build outs we should talk about stealing in the context of technology is America trying to force a technology transfer from tsmc to an American company this channel has previously covered technology transfer situations and generally they come in the form of joint ventures where the foreign company has to partner with an indigenous company furthermore there need to be specific requirements on how much of the final product needs to be indigenous how much enhanced knowledge transfer from The Foreigner to the native company happens and so on I haven't seen any of these tsmc is not doing a joint venture and with the one exception of that ssmc Fab in Singapore they have always owned their Fabs outright this was even the case when they expanded to the Chinese mainland there's always the risk of a high level executive pulling a Richard Zhang and starting his own company but an Arizona Fab doesn't change that risk I've seen people on Twitter saying that America has stolen quote unquote all or konko a lot of taiwan's manufacturing causing quote-unquote massive loss to the Taiwanese economy I agree that tsmc is incredibly valuable to Taiwan but we need to review scale in order for those Twitter claims of all or even a lot to be true we need to see indications that tsmc is investing significantly more in the U.S Japan or Europe than it is in Taiwan right now the information we have in hand make it hard to credibly make that claim let's look at it on the basis of capital expenditure tsmc will spend about 36 billion dollars in capital expenditure in 2022. who knows what will happen in 2023 and Beyond to 2026 but let's say 36 billion each year just to be conservative this second Arizona Fab investment adds about 28 billion over the three years into 2026 or 9 billion dollars a year that's 25 to 30 of the proposed annual 36 billion dollar cap expand the majority of the company spend will still be in Taiwan let's look at it on a basis of wafer shipments last year in 2021 tsmc produced and shipped 14.2 million 300 millimeter equivalent Wafers they'll probably do something like 15 to 16 million waivers this year or about 1.3 million Wafers a month a significant number of those are produced in Taiwan I reckon maybe 75 to 85 percent when this Arizona Fab starts production in 2024 still over a year away that factory produced somewhere around 20 300 millimeter equivalent Wafers a month that is less than 1 50th of current annual production even after the planned expansion to 50 000 Wafers a month in 2026 it will still not be enough we need another five or even 10 times what has already been invested there's not enough subsidies to make it happen tsmc is doing a fat facility in Arizona it's getting a lot of press yes but we cannot forget that tsmc is juggling at least five other such build outs in Taiwan I have mentioned new faces to existing Taiwanese faps I showed the Tainan expansions in my video visit there a few months back when I was there I saw at least four new build outs I will try to swing by next time and get a better look at them tsmc is also working on new N2 plants in bausan and perhaps maybe in Taichung which I already mentioned before Taiwanese media is also making a lot of noise about future plans for an N1 plan in the longtime District of Southern Italian city in between shinchu and new Taipei City and one yes and there is also that gauchong Fab it used to be an n28 and N7 Fab but with recent low utilization and N7 capacity due to weakness in the cell phone market the company has rolled back the N7 part but they're still moving ahead on the n28 build with construction officially beginning in November 2022. I cannot say they have seen it with my own eyes but I guess I can head over there later to check just for sure at first glance the notion that America is stealing tsmc from Taiwan is a bit ridiculous that I shouldn't bother doing a whole video about it but as the American Mark Twain said a lie can travel halfway around the world before the truth puts on its shoes people should think through what they're saying Taiwan is still tsmc's greatest asset Ben Thompson recently said this in a podcast appearance and I agree tsmc has no choice but to go all in on Taiwan try to compete on Intel's home turf is a recipe for eventual failure there's one final thing that I want to add the problematic assumption when it comes to this Arizona Fab and others like it is that it takes tsmc off the board that America is now self-sufficient in Silicon people again aren't thinking through what they're saying I would like to bring up three major issues first the majority of the world's most industrial important semiconductors the one going into your fridges airplanes and cars are not the Leading Edge N4 and N3 chips that the Arizona Fab will make those are 130 nanometer 65 nanometer and n28 chips these chips are high in volume but low in price the majority of tsmc's volume but a minority of its Revenue I talked about this issue earlier in another video second what about taiwan's other semiconductor foundries UMC the number three largest Foundry power chip the seventh and Vanguard the eighth these are not tsmc duplicates they have specialty processes that few others have and taiwan's leading positions and the rest of the chip supply chain like Wafers packaging assembly and testing America's position in Global Packaging assembly and test capacity is even worse than its fabrication market share three percent as opposed to ten percent America might have a chance in advanced packaging which is more expensive and so mostly for high performance Computing but there is no Arizona Fab or national government funding for conventional packaging they're not even trying Taiwan has three of the world's five largest outsourced semiconductor packaging assembly and testing companies including the largest by far ASC group the other two are sbil and power tech technology I came across massive Fabs in gauchunk just doing conventional Packaging I want to do a video about these companies later on someday when I have the time and energy they are very underrated these are the things that will a global supply chain and it will be expensive maybe even economically impossible to duplicate all of it and third the managers running the Fabs are in Taiwan not just c-suite Personnel thousands of difficult to replace people doing r d operations and Supply Chain management can the hands still move if the brain is cut off billions of dollars and some 50 years of Industrial Development help make Taiwan a leader not just in semiconductor manufacturing but also in other things like Electronics assembly and Specialty Plastics you don't replace that in a year at a new Fab in Arizona doesn't change that the China Taiwan scenario is a systemic risk Beyond a few companies in the sector your portfolio isn't protected just because you bought Intel stock rather than tsmc stock for the foreseeable future it and its wider repercussions cannot be hedged against so yeah I don't know what can be done all I have is my own personal opinion broadly reflected amongst the larger Taiwanese population the status quo has done a whole lot for everyone I hope the status quo continues on all right everyone that's it for tonight thanks for watching subscribe to the Channel Sign up for the newsletter and I'll see you guys next time

Channel: Asianometry

Views: 747,860

Keywords: asianometry

Id: rzZC6aFsk3M

Length: 12min 47sec (767 seconds)

Published: Thu Dec 08 2022