TSMC’s U.S. Subsidies At Heart Of Controversial Commentary By U.S. & Taiwanese Academics

Veloz Lamma

TSMC’s U.S. Subsidies At Heart Of Controversial Commentary By U.S. & Taiwanese Academics

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The United States’ multi-billion dollar effort to re-shore advanced leading edge semiconductor fabrication inside its borders can harm Taiwan’s indigenous chip industry, believe academics in a new research paper. The passage of the U.S. Creating Helpful Incentives to Produce Semiconductors (CHIPS0 Act earmarks billions of dollars in subsidies for firms such as the Taiwan Semiconductor Manufacturing Company (TSMC) to set up high-end chip manufacturing facilities inside America.

While TSMC’s most advanced chip foundry in the U.S. will be its facility in Arizona, over the long term, as other players such as Samsung and Intel also speed up their advancements, the bill’s aim can see leading-edge processes of the future, equivalent to the advantage enjoyed by today’s technologies such as 2-nanometer, manufactured inside American foundries.

Specialization Is A Key Aspect Of Global Semiconductor Supply Chain Argue Academics From U.S. & Taiwan

Since it requires capital, expertise and licensing, the global semiconductor industry is dominated by a handful of players. On the design side of things, NVIDIA, Intel and AMD share the pie, while personal computing chips are primarily manufactured by Intel and TSMC. This means that the history of firms is the history of the industry.

TSMC’s rise to become the world’s most advanced chip manufacturing company was overseen by its founder, Morris Chang, and current CEO, C.C. Wei. Therefore, while Wei, who was leading the firm when it announced the new chip manufacturing facility in Phoenix, Arizona, remained cautiously optimistic at the time, Chang, who had retired, stayed true to his frank nature when commenting about his company’s plans.

The TSMC founder had shared on multiple occasions that one of the biggest hurdles the firm would face while relocating to the U.S. would be finding the right workers to manage its chip-making machines. Academics from the U.S. and Taiwan reiterate these concerns in their commentary published in Project Syndicate.

They believe that “specialized skills are critical” when it comes to when it comes to chip manufacturing as there are more chip designers than manufacturers in the U.S. TSMC’s stated reason for the delays in its Arizona facility has seen it comment on the need for flying workers from Taiwan to help install equipment at the site.

TSMC’s chairman Dr. Mark Liu in Tainan, Taiwan in November 2022 as part of a beam lifting ceremony for a 3-nanometer manufacturing extension. The executive recently announced his retirement and urged caution about A.I. last year. Image: Liu Xuesheng/UDN

Most chip manufacturing in the U.S. has been carried out by Intel; however, the growth in smartphones and processors shipped by Apple, AMD and Qualcomm has changed the industry significantly in the previous decade. All these firms rely on TSMC for their processors and other silicon, which means that the requirements of large-scale global chip manufacturing outstrip the labor pie available in the U.S. alone.

The commentary authors added that TSMC can become complacent and focus on securing subsidies instead of keeping its scanners sharp. They conclude that the CHIPS Act will eventually harm TSMC and Taiwan, with one of the biggest risks being underinvestment in the island region.

However, even in such a scenario, U.S. chip manufacturing would likely be better off, with TSMC’s management and investors having the comfort of their multi-billion dollar chip plants being away from geopolitical epicenters. The Taiwanese firm had made rapid strides with its plans to build a new chip manufacturing facility in Japan. Analysts have cited hope multiple times that the Japanese efforts will be aided by a cultural similarity between the two nations.

TSMC’s plans in Japan moved forward earlier this month when the Japan Advanced Semiconductor Manufacturing, Inc. (JASM) inaugurated a 7-nanometer chip site in Japan’s Kumamoto prefecture. TSMC owns a majority stake in JASM and the site will focus on broader industrial and automotive semiconductor fabrication due to stakes held by big-ticket Japanese names DENSO, Sony and Toyota. JASM is a 20 billion initiative, and Toyota confirmed in February that it will take a minority stake in the company.

The academics’s commentary comes as not only the U.S. but also Japan is also enticing TSMC with billions of dollars in subsidies to expand its manufacturing footprint in the country. At the ceremony for the inauguration, the Japanese government announced an additional 732 billion yen in subsidies to help TSMC build a second chip plant in the country.

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