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TSMC ups Arizona investment from $12B to $40B with second semi fab
- russianGuy83829 4y agoThats why Buffet bought that stock a week ago..
- brookst 4y agoIt’s good news geopolitically, and the construction will produce a lot of jobs. But people should temper long-term job expectations. This huge of an investment in a tech where TSMC will face competition from fabs in lower-cost countries almost certainly means the company believes it can use extensive automation to avoid having labor costs sink their ability to compete on price. (Yes, there may be a window where they don’t have to compete on price, but you build fabs for 5-10 years of production)
- bmitc 4y ago> It’s good news geopolitically I actually think the opposite. It will be good for global supply chains but not geopolitics, because it reduces the reliance on Taiwan thus opening it up for assimilation.
- baybal2 4y agoThat fab will not be even 1% of US semiconductor consumption. And it will come to a halt within weeks if consumables will stop coming from Taiwan.
- ianai 4y agoNope. Chips clearly have a national security component. Ensuring local supply reinforces national security. Which reinforces geopolitical commitments through making those commitments more credible. Edit-removed a comment
- mlindner 4y agoI think it actually increases assimilation with the US instead. One of the things that improved US relations with Japan when there was fear that they would take over the US was when they started building a bunch of US-based manufacturing.
- kibwen 4y agoThat's describing something different. In the 80s the US was worried that Japan would dominate the US economically. The dynamic here is that Taiwan is worried that China will dominate Taiwan militarily. The assimilation being referenced above is not between the US and Taiwan, but between the Taiwan and China.
- kube-system 4y agoThe US has no such fear about Taiwan. Taiwan has a fear that they will be invaded by China if they do not have industry that is too important to China to be interrupted by war.
- brookst 4y agoAre you saying China is more likely to invade Taiwan if the destruction of TSMC’s Taiwanese fabs could be mitigated by buying the same products from TSMC’s US-based fabs?
- ido 4y agoI believe what they are saying that the US is less likely to risk war with China to protect Taiwan if they can get chips sources domestically.
- kube-system 4y agoI phrased that wrong. I meant that they want to be important to the world in general (and the US), not specifically China.
- brookst 4y agoEven if it were bad for Taiwan, geopolitics is about more than Taiwan. But I’m not sure this is bad for Taiwan: today, China can wipe out TSMC overnight. With these fabs there will be Taiwanese revenue streams coming from mainland US, which streams can support Taiwan government and military. Walk me through why it’s bad for Taiwan to be more economically diversified?
- Animatronio 4y agoWell for one the US won't be so inclined to defend TW so much. Sure, there will be posturing, maybe even a proxy war like in Ukraine, but generally speaking the US will not be sending troops anymore, now that the golden goose has nested on its shores.
- mupuff1234 4y agoI'm guessing Taiwan received quite a carrot in order to get their approval for the TSMC expansion.
- Animatronio 4y agoNo carrot I'm afraid :D I think this decision was 100% made by TSMC and the US. Both get what they want: - continuity of operations and safety for TSMC - locally sourced chips for the US and most importantly - much diminished importance for Taiwan, meaning they do not have to defend it with troops (which is the most important aspect of war - see Afghanistan, Vietnam, and so on).
- boc 4y agoOr conversely the US will commit even more resources to the defense of Taiwan now that their own domestic supply of chips is safe. The US had no strategic interest in Ukraine yet we’ve all seen the reaction. The US will gladly defend Taiwan and create the hill for the CCP to die upon.
- Animatronio 4y ago
- totalZero 4y agoAbsent any form of fab redundancy in the global economy, the fabs make Taiwan fragile in the eyes of the Western powers. Taiwan is safer when it is not a pressure point for the entire Western economy because it's easier to defend territory that can withstand a few hits.
- yyyk 4y agoIt may be a useful talking point to get the public to do the right thing on Taiwan, but frankly there's no meaningful economic reliance on TSMC/Taiwan and policy makers know this.
- baybal2 4y ago
- mlindner 4y ago> This huge of an investment in a tech where TSMC will face competition from fabs in lower-cost countries almost certainly means the company believes it can use extensive automation to avoid having labor costs sink their ability to compete on price. What countries are you imagining that will suddenly become competitive in semiconductor manufacturing? As far as I know there are no up and coming companies of note. (Companies in China are not of note as they have been permanently prevented from further advancement.)
- sidibe 4y agoYup, this isn't making the cheapest t-shirts possible. The cost of labor is nothing compared to the revenues. For a fab you want a stable government and environment, and good tax/trade situation, and reliable, quality labor.
- anonymouslambda 4y ago"Permanently prevented" -- semi manufacturing is an engineering problem, not magic. Engineering problems can be solved, unless you think Chinese people are inherently inferior engineers.
- quonn 4y agoIt‘s not that easy to duplicate the institutional knowledge of companies like Zeiss, for example, otherwise they would have a lot of competition already.
- nonethewiser 4y agoWell that seems significant. Article says the chips in the 2nd fabs will be better than the first. And will meet all domestic US demand. Not sure what all that includes. I wonder how domestic the full supply chain is. If the US is relying on China for rare earth metals or something.
- ianai 4y agoThe US has rare earth mines and even more deposits. They just got priced out through decades of lower prices for those minerals. (Which just shows that resource allocation even for scarce resources, follows financial incentives similar to other financial considerations. Stuff being left in the ground actually makes them available for another day when they’re higher valued.)
- kibwen 4y agoIndeed, but rare earth mining also has negative environmental impact even above and beyond normal mining operations. The US is partly paying China to outsource the environmental devastation.
- Clent 4y agoNo, China is absorbing the economic impact of destroying their own environment. There is no blame to be placed else where. No one is tricking China into destroying their environment.
- robertlagrant 4y agoI don't think previous poster said they were.
- googlryas 4y agoChina demanded it even, by basically cornering the rare earth market via dumping
- akiselev 4y ago
- KoftaBob 4y agoI've been trying to build a habit lately of finding the primary source of news like this, especially since news agencies seem to be very hit or miss with whether they link to their primary source. So for whoever is interested, this is the original announcement by TSMC themselves: https://pr.tsmc.com/english/news/2977 https://pr.tsmc.com/english/news/2977
- sdsd 4y agoThanks, that's a really cool habit! Has this lead to any changes re how you perceive news? How far does news tend to deviate from the sources you find?
- KoftaBob 4y agoThe most common pattern I’ve noticed is that news publications will typically include small snippets from the primary source, and then fill the bulk of their article with what amounts to opinion commentary. It ends up being something that’s technically factual (at best), but spends most of its time trying to convince you of how to feel about the info, rather than just relaying information to you. This has also inspired me to build a news aggregator site that consists entirely of primary sources like government agencies, company/organization announcements, and statements directly from the person in question on their verified social media.
- MegaSec 4y agoGood.
- FpUser 4y agoI guess this is TSMCs getaway if things will get sour with China.
- warinukraine 4y agoRemember when Warren Buffet invested into TSMC and someone said he must know something we don't?
- PartiallyTyped 4y agoTSMC has had a license to print money for a while now given how huge ASML’s backlog is.
- chrisjc 4y agoIs ASML even going to be able to meet the demand created by all these fabs opening up across the US (and rest of the world)? The stories I've heard about what it takes to build a single machine would suggest to me that scaling up would be a huge feat and I could only imagine take years to accomplish. Then again, perhaps TSMC and their peers had predicted this kind of growth and already placed their orders long ago?
- criddell 4y agoI keep wondering if this is different than when Foxconn announced a $10b investment in Wisconsin but carried through less than 10% of that?
- klelatti 4y agoI'm interested in the financial aspect of this. Assuming US Fabs are more expensive than in Taiwan that then must mean lower margins or higher prices. I wonder if Apple for example has said that they are prepared to pay a premium to ensure diversity of supply?
- jason-phillips 4y agoThe iPhone SoC was made by Samsung in Austin for many years, so this has already happened. At the time everyone assumed that Apple wanted to diversify away from Samsung for other reasons which were not necessarily financial.
- klelatti 4y agoI bet the Samsung SoC's were a lot cheaper though as less sophisticated. Samsung -> TSMC got them away from a competitor, possibly cheaper (US -> Taiwan) and onto better roadmap. This is quite different and possibly a further sign of Apple spending to diversify supply chains.
- deleted 4y ago[deleted]
- tooltalk 4y agoIt was probably a bit cheaper, but Apple was Samsung's anchor customer since mid 2000's. I don't think Apple used Samsung's 10nm or 7nm -- ie, there was no "dual sourcing" or "diversifying" supply chains to speak of. I think Apple's move to TSMC was largley driven by Apple's China/Taiwan first outsourcing practices.
- GeekyBear 4y ago> At the time everyone assumed that Apple wanted to diversify away from Samsung for other reasons which were not necessarily financial. When Apple was dual sourcing chips from both Samsung and TSMC, the Samsung version of the A9 had a ~10% reduction in battery life compared to the TSMC version, although the performance was nearly identical otherwise. https://www.tomshardware.com/news/iphone-6s-a9-samsung-vs-tsmc,30306.html https://www.tomshardware.com/news/iphone-6s-a9-samsung-vs-ts...
- Jenkins2000 4y agoI remember reading that making chips requires a lot of water, something that Arizona is running out of, will this be a problem?
- gjsman-1000 4y agoIf I was conspiratorial, I’d say this serves as a excuse for building more pipelines for getting more water from other states.
- peteradio 4y agoWhat is the longest and (large enough) volume water piping system in the world? From my recollection its not long enough to significantly make inroads to another state. edit: I think I might be wrong, looks like China has done significant waterworks across their country.
- Vt71fcAqt7 4y agoWhy isn't it the same as say an oil pipeline? Those can get really long.
- nickvanw 4y agoOil is significantly more valuable than water - the added cost per gallon of water would be astronomical. 1 oil barrel is 42 gallons and costs around $75 today. I pay about $6 per CCF of water which is 748 gallons. It might be worth doing this with oil, but even if you scaled it up, it would be hard not to have the transport cost more than the actual water.
- bcrosby95 4y agoIt would be cheaper to just desalinate it. Of course Arizona doesn't really have that option. But California does, and Arizona already sources water from the Colorado River, which California does too. Anyways. I think moving California off the Colorado River would do a lot to ease the water problems in the southwest.
- _8j50 4y agoDon't these fabs need like an insane amount of water? Why would they build it of all places in arizona which as far as I know barely meets drinking water requirements (at least at some cities) and is basically mostly a desert?
- tony_cannistra 4y agoI came here for this comment. Thank you for bringing this up. Although Phoenix is one of America's most progressive cities with regard to minimizing per-capita water usage, the whole prospect of the city of Phoenix was ill-conceived from the beginning. Of course that doesn't matter now -- the city is there. But I hope that TSMC knows what they're getting themselves in to.
- shagie 4y agoAn article from August 2021: Water shortages loom over future semiconductor fabs in Arizona https://www.theverge.com/22628925/water-semiconductor-shortage-arizona-drought https://www.theverge.com/22628925/water-semiconductor-shorta... > Chipmakers are setting up shop in Arizona as drought worsens > Major semiconductor manufacturers looking to expand in Arizona will likely be spared from water cuts induced by an unprecedented water shortage in the Southwest, at least for now. As part of the scramble to end a shortage of another kind — the global dearth in semiconductor chips — both Intel and TSMC plan to open new facilities in Arizona. But they’re setting up shop just as one of the worst droughts in decades grows worse across the Western US. > ... > While Intel recycles much of its water, more fabs will mean it will need to send even more water through its systems. The company says that Arizona has been “vital” to Intel’s operations for more than four decades. The state is already home to its first “mega-factory network” and its newest semiconductor fab. Intel used more than 5.2 billion gallons of water in Arizona in 2020 — roughly 20 percent of which was reclaimed water, according to its most recent corporate responsibility report. > ... > TSMC said in an email to The Verge that for now it doesn’t expect the water shortage to have “any impact” on its plan to build a new fab in Arizona, although it says it will “continue to monitor the water supply situation closely.”
- 4y ago
- aresant 4y agoThis + the recent news that Apple is planning to diversify production out of China (1) is hard not to read into regarding the US' view of where US/China relations are heading . . . any geopolitical armchair experts have a view? (1) https://www.wsj.com/articles/apple-china-factory-protests-foxconn-manufacturing-production-supply-chain-11670023099 https://www.wsj.com/articles/apple-china-factory-protests-fo...
- markus_zhang 4y agoI read it as an interest exchange between US and China. US has the upper hand here so managed to grab some good stuffs fron TW while China probably got the permission to go in the future.
- uni_rule 4y agoPolicies like this actually move pretty slowly. This is still a reaction to Ukraine in february, not planning for anything in particular, just the possibility of a fucked status quo.
- vinibrito 4y agoOr maybe even a reaction to the pandemic. Which means a couple years ago at least.
- hayst4ck 4y agoI think not being able to procure n95 masks because mask production was all off-shored, particularly to China, was a real wake up call that supply chain security is integral to national security. Ukraine was the moment that showed that: "No two countries that both have a McDonald's have ever fought a war against each other." is a false idea. Hong Kong made it clear that the idea of increasing prosperity in China will not lead to it's liberalization, nor can China be relied upon to be bound by documents that are "historical documents that no longer have any practical significance."
- 4y ago
- bfrog 4y agoIt's interesting to see semi fab factories becoming a hot thing here in the states with an entire campus being rolled out in Ohio along with expansions and further growth in the southwest. Can only mean good things for workers as more options become available.
- adam_arthur 4y agoOnshoring is a logical result of improved automation. When labor costs lessen, transportation and logistics become the primary concern. Wouldn’t be surprised if 100 years from now most final good assembly is done locally. Of course sometimes raw materials and inputs are more expensive to transport than the finished good, so there will always be cases where long distance transportation of finished products is still preferred
- conradev 4y agoOnshoring in this case is a logical result of improved tax incentives. Almost every cost is higher in the US – not just labor. Improved automation does reduce costs, but those cost reductions are even better in places where manufacturing is already cheap. Semiconductors have a very high value to weight ratio, so shipping them globally makes more sense than it does for other items.
- adam_arthur 4y agoThe cost difference between US and China for a fully automated factory is negligible. Even considering real estate costs and taxes. No tax incentive needed to onshore in the long run
- CHY872 4y agoWhile semiconductor fabs are highly automated, the machines are complex enough and do extreme enough things that they break a lot, requiring human intervention. MTBF for many of the machines used can be measured in hours, it's not like you can set up and go home. TSMC has around 65k employees overall - a cursory search did not yield their makeup by job breakdown, although from 1997 through 2003 around 50% of their employees were 'factory' workers via [0]. I'd expect high-margin items like semiconductors to be more amenable to onshoring anywhere - certainly Intel has almost all of its fabs in highly developed countries, but I think this is hardly a cost efficiency move - rather it's a hedge against the failure of globalization and the risk of the US losing access to advanced semiconductor technology in case of strife in Taiwan. Russia has already lost this access. TSMC took in about $56B in '21, of which about $28B was 'cost of revenue', the amount they needed to spend on supporting this revenue (marketing, legal, production, e.g., not building factories or R&D). There's certainly room for increased production costs while maintaining a profit. [0] - https://www.researchgate.net/figure/TSMC-personnel-structure-by-job-title-and-education-level_tbl4_46541360 https://www.researchgate.net/figure/TSMC-personnel-structure...
- Tempest1981 4y agoAre the 2 plants side-by-side? Or some distance apart? Edit: I found another article that says they are at the same site.
- Lind5 4y agoAstounding amount of semi investments. $500B in this list alone https://semiengineering.com/where-all-the-semiconductor-investments-are-going/ https://semiengineering.com/where-all-the-semiconductor-inve...
- throwaway4good 4y agoThe geopolitical context for this is wild; and in some ways is Taiwan selling its crown jewels and sacrifying its strategic relevance for unclear returns. https://asiatimes.com/2022/12/us-mulls-scorched-earth-strategy-for-taiwan/ https://asiatimes.com/2022/12/us-mulls-scorched-earth-strate... US mulls scorched earth strategy for Taiwan US strategy to blow up Taiwan’s semiconductor fabs to deter China might do more harm than good The US is mulling disabling or destroying Taiwan’s semiconductor factories in the event of a Chinese invasion. This stark change raises questions about its capabilities and commitment to defend the island.
- deleted 4y ago[deleted]
- r00fus 4y agoThe "mulls scorched earth strategy" part is completely solid game theory. Always make it clear for your opponent that your worst-case scenario will result in severe blowback if at all possible. Then you can a) try to ensure that scenario never happens and b) mitigate the outcome or response if it does.
- rsj_hn 4y agoBut it's only solid game theory if one side doesn't have escalatory dominance. For example, during the cold war, the US always had far, far fewer troops in Europe than the Soviet Union, and didn't have anywhere near the sea-lift capacity to transport the quantities of men and material necessary across the Atlantic to defend Europe. But we had nukes, and so we had plans to nuke Germany in case Warsaw pact forces invaded and made sure the Soviets understood those plans. Nuclear weapons nullified the escalatory dominance of the Soviet Union in a land war against NATO. Now, the question is, who has escalatory dominance in Taiwan? It's clearly China. All the US can do is blow up the chip fabs, but China wants Taiwan for reasons that have nothing to do with the chip fabs, and would still want Taiwan even if it had no chip fabs. Even if it had no industry or population whatsoever. Whereas the US only wants Taiwan for the fabs, which China can destroy whenever it wants. Unless we actually put nukes in Taiwan or commit to defending Taiwan with nukes, China will have escalatory dominance and not the U.S. So that leads us to the second question -- what happens when you threaten to escalate but the other side has escalatory dominance? Then you end up making the situation worse, because you are in effect provoking the other side to begin a chain of events in which you are guaranteed to lose. That is not solid game theory.
- MrMan 4y agoWhy Arizona why not NY state
- PHGamer 4y agobig investment eh? guess tsmc knows china is going to invade soon.
- notyourwork 4y agoDoes anyone else wonder how the water issues that we are seeing become more pervasive in the south west will impact long term investment? I have family that lives in PHX so I'm familiar with the area and much of the development. Though I cannot help but conclude that at some point water shortages become a massive problem in that area. My naive understanding is fab plants recycle (re-use?) much of their water but ignoring that, fab plants need people and people need water.
- s0rce 4y agoMy understanding is also that fabs can mostly re-use water. I don't know as much about AZ but in NV and CA most of the water is "wasted" on low-value agriculture and doesn't go to people.