8 ms·

Onshoring is a logical result of improved automation. When labor costs lessen, transportation and logistics become the primary concern. Wouldn’t be surprised i

Onshoring 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 ago
Onshoring 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 ago
  The 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 ago
    While 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...
- rdevsrex 4y ago
  Which is driven by concerns over the safety of Taiwan's fabs.
- thereddaikon 4y ago
  The highest costs in Semiconductor fabrication are the specialized machines needed. Most of them are at best dual sourced. Many are single sourced. The fact a technician in the US can make $100k when their counterpart in China would make $50k doesn't matter when the EUV Lithography machine is hundreds of millions of dollars.
  - andrewmutz 4y ago
    Who makes those expensive machines? Are they made in-house by companies like TSMC? Or are they purchased from others? And whats the geopolitics of that part of the supply chain (made in taiwan? made in china? made elsewhere?)
    - thechao 4y ago
      In many ways, ASML: https://www.asml.com/en/products/euv-lithography-systems https://www.asml.com/en/products/euv-lithography-systems
      - briffle 4y ago
        ASML is the very high end, but there are many other manufacturers as well. Canon and Nikon both make lithography systems used in many wafer fabs.
        r00fus 4y ago
        I really doubt anyone else than ASML can do 4nm (which this factory is planned to target).
      - tpowell 4y ago
        Interesting 18min CNBC tour of ASML and their unique technology: https://youtu.be/iSVHp6CAyQ8 https://youtu.be/iSVHp6CAyQ8
    - pkaye 4y ago
      The machines are made by other companies. Lithography is the most expensive now and its made by ASML in Netherlands is the only solution for EUV lithography. But there are many steps in manufacturing and a machine for each. The major equipment manufactures are spread across US, Europe and Japan. In the US the three big equipment manufacturers are Applied Materials and Lam Research and KLA. The costs are probably driven by extreme engineering requirements (temperature, pressure, corrosive chemicals, low contamination) and R&D costs to meet these requirements. The production volumes are not high either. Its not like they are building millions of these machines. Asianometry on YouTube is a good source for this kind of topic. https://www.youtube.com/watch?v=5Ge2RcvDlgw https://www.youtube.com/watch?v=5Ge2RcvDlgw
- ouid 4y ago
  the cost reductions are necessarily worse in the places where costs are lower. I think you didnt do that math right. You might be right that the logistics for shipping silicon are still so good that this does not reach the amdahl limit, but it is not a consequence of your argument.
- fundad 4y ago
  "Tax incentives" like writing off Capex have been there for the taking. So yes, the improved tax incentives with bipartisan support translates to stability for investors.
- phendrenad2 4y ago
  The benefits of JIT manufacturing outweigh everything else though. The waves of oversupply and undersupply in the semiconductor world are something that only JIT can fix, and transportation costs are only low if you go against JIT and try to bulk ship items.
totalZero 4y ago
It would make more sense to put the mega-fabs where electricity is cheapest in the Americas, and that certainly isn't Arizona.
- thehappypm 4y ago
  Isn’t solar the cheapest energy per KwH? A sunny place like Arizona with tons of empty space should be able to cheaply deploy lots of energy.
  - samcheng 4y ago
    The cheapest energy is from a hydroelectric plant built generations ago. Fun fact: That's why Boeing first built their planes outside Seattle - the electricity needed to refine the aluminum was cheap. These days, you can see that effect in the large datacenters that have sprung up near the Columbia River in Oregon. I'd guess TSMC's siting decision had a lot to do with tax breaks, labor pool, and cheap land.
    - atlasunshrugged 4y ago
      Probably also hedging for geopolitical risk? Not sure how only having facilities in a country at least somewhat likely to be invaded in the next few years affects the stock price but it probably doesn't hurt to put one in the middle of a country very unlikely to be invaded and very likely to want to purchase chips built domestically.
      - gct 4y ago
        Fun fact most experts consider the US uninvadable: https://en.wikipedia.org/wiki/Invasion_of_the_United_States#Geographic_feasibility https://en.wikipedia.org/wiki/Invasion_of_the_United_States#...
        TedDoesntTalk 4y ago
        Another fun fact. There were incursions on both US coasts during WWII. Neither were significant: Long Island, Florida, and Maine invasion by nazi spies swimming to shore from German submarines: https://www.fbi.gov/history/famous-cases/nazi-saboteurs-and-george-dasch#:~:text=Four%20men%2C%20led%20by%20George,%3B%20and%20Richard%20Quirin%2C%2034 https://www.fbi.gov/history/famous-cases/nazi-saboteurs-and-.... Japanese in Attu and Kiska islands in Alaska: https://www.history.com/.amp/topics/world-war-ii/battle-of-the-aleutian-islands https://www.history.com/.amp/topics/world-war-ii/battle-of-t...
throwaway4good 4y ago
This has got nothing to do with improved automation.
richardwhiuk 4y ago
This isn't onshoring - onshoring would be moving to Taiwan - this is the Taiwanese Semiconductor Manufacturing Corporation.
- lifeisstillgood 4y ago
  This is onshoring - to the shores of a country whose national sporting league called The World Series. There is a distinctly USA centric view of the world :/)
  - _-david-_ 4y ago
    MLB isn't a national thing. There are two countries (US and Canada) who have teams.
    - lifeisstillgood 4y ago
      Honestly I am not sure if that is sarcasm or not :-)
      - _-david-_ 4y ago
        It is not sarcasm. How could something strictly be a US thing when both the US and Canada partake?
- philwelch 4y ago
  It’s onshoring from the perspective of an American company that contracts out to TSMC fabs, such as Apple, AMD, nVidia, Marvell, Qualcomm, or other major TSMC clients. Sony is also a TSMC client so if TSMC built fabs in Japan, Sony would be onshoring.
  - throwaway2037 4y ago
    Hsinchu, Taiwan, R.O.C., Nov. 9, 2021 - TSMC (TWSE: 2330, NYSE: TSM) and Sony Semiconductor Solutions Corporation (“SSS”) today jointly announced that TSMC will establish a subsidiary, Japan Advanced Semiconductor Manufacturing, Inc. (“JASM”), in Kumamoto, Japan to provide foundry service with initial technology of 22/28-nanometer processes to address strong global market demand for specialty technologies, with SSS participating as a minority shareholder. Ref: https://pr.tsmc.com/english/news/2880 https://pr.tsmc.com/english/news/2880
tester756 4y ago
People are cheap in semico in compare to building/equipment
WatchDog 4y ago
Semiconductors are probably one of the lightest products relative to their costs. So as you alluded to, the long distance logistics of delivering the finished products, have a negligent impact on it's price.
csomar 4y ago
Huh? This is re-shoring by political influence (probably pressuring Taiwan/TSMC) and financial incentives. Both TSMC and Samsung[1] are buildings Fabs in the US. Both Taiwan and South Korea are dependent on US military for their own existence. This is anti-competitiveness at its best. [1]: https://www.anandtech.com/show/16483/samsung-in-the-usa-a-17-billion-usd-fab-by-late-2023 https://www.anandtech.com/show/16483/samsung-in-the-usa-a-17...

conradev 4y ago

Onshoring 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 ago
The 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 ago
  While 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...
rdevsrex 4y ago
Which is driven by concerns over the safety of Taiwan's fabs.
thereddaikon 4y ago
The highest costs in Semiconductor fabrication are the specialized machines needed. Most of them are at best dual sourced. Many are single sourced. The fact a technician in the US can make $100k when their counterpart in China would make $50k doesn't matter when the EUV Lithography machine is hundreds of millions of dollars.
- andrewmutz 4y ago
  Who makes those expensive machines? Are they made in-house by companies like TSMC? Or are they purchased from others? And whats the geopolitics of that part of the supply chain (made in taiwan? made in china? made elsewhere?)
  - thechao 4y ago
    In many ways, ASML: https://www.asml.com/en/products/euv-lithography-systems https://www.asml.com/en/products/euv-lithography-systems
    - briffle 4y ago
      ASML is the very high end, but there are many other manufacturers as well. Canon and Nikon both make lithography systems used in many wafer fabs.
      - r00fus 4y ago
        I really doubt anyone else than ASML can do 4nm (which this factory is planned to target).
    - tpowell 4y ago
      Interesting 18min CNBC tour of ASML and their unique technology: https://youtu.be/iSVHp6CAyQ8 https://youtu.be/iSVHp6CAyQ8
  - pkaye 4y ago
    The machines are made by other companies. Lithography is the most expensive now and its made by ASML in Netherlands is the only solution for EUV lithography. But there are many steps in manufacturing and a machine for each. The major equipment manufactures are spread across US, Europe and Japan. In the US the three big equipment manufacturers are Applied Materials and Lam Research and KLA. The costs are probably driven by extreme engineering requirements (temperature, pressure, corrosive chemicals, low contamination) and R&D costs to meet these requirements. The production volumes are not high either. Its not like they are building millions of these machines. Asianometry on YouTube is a good source for this kind of topic. https://www.youtube.com/watch?v=5Ge2RcvDlgw https://www.youtube.com/watch?v=5Ge2RcvDlgw
ouid 4y ago
the cost reductions are necessarily worse in the places where costs are lower. I think you didnt do that math right. You might be right that the logistics for shipping silicon are still so good that this does not reach the amdahl limit, but it is not a consequence of your argument.
fundad 4y ago
"Tax incentives" like writing off Capex have been there for the taking. So yes, the improved tax incentives with bipartisan support translates to stability for investors.
phendrenad2 4y ago
The benefits of JIT manufacturing outweigh everything else though. The waves of oversupply and undersupply in the semiconductor world are something that only JIT can fix, and transportation costs are only low if you go against JIT and try to bulk ship items.

totalZero 4y ago

It would make more sense to put the mega-fabs where electricity is cheapest in the Americas, and that certainly isn't Arizona.

thehappypm 4y ago
Isn’t solar the cheapest energy per KwH? A sunny place like Arizona with tons of empty space should be able to cheaply deploy lots of energy.
- samcheng 4y ago
  The cheapest energy is from a hydroelectric plant built generations ago. Fun fact: That's why Boeing first built their planes outside Seattle - the electricity needed to refine the aluminum was cheap. These days, you can see that effect in the large datacenters that have sprung up near the Columbia River in Oregon. I'd guess TSMC's siting decision had a lot to do with tax breaks, labor pool, and cheap land.
  - atlasunshrugged 4y ago
    Probably also hedging for geopolitical risk? Not sure how only having facilities in a country at least somewhat likely to be invaded in the next few years affects the stock price but it probably doesn't hurt to put one in the middle of a country very unlikely to be invaded and very likely to want to purchase chips built domestically.
    - gct 4y ago
      Fun fact most experts consider the US uninvadable: https://en.wikipedia.org/wiki/Invasion_of_the_United_States#Geographic_feasibility https://en.wikipedia.org/wiki/Invasion_of_the_United_States#...
      - TedDoesntTalk 4y ago
        Another fun fact. There were incursions on both US coasts during WWII. Neither were significant: Long Island, Florida, and Maine invasion by nazi spies swimming to shore from German submarines: https://www.fbi.gov/history/famous-cases/nazi-saboteurs-and-george-dasch#:~:text=Four%20men%2C%20led%20by%20George,%3B%20and%20Richard%20Quirin%2C%2034 https://www.fbi.gov/history/famous-cases/nazi-saboteurs-and-.... Japanese in Attu and Kiska islands in Alaska: https://www.history.com/.amp/topics/world-war-ii/battle-of-the-aleutian-islands https://www.history.com/.amp/topics/world-war-ii/battle-of-t...

throwaway4good 4y ago

This has got nothing to do with improved automation.

richardwhiuk 4y ago

This isn't onshoring - onshoring would be moving to Taiwan - this is the Taiwanese Semiconductor Manufacturing Corporation.

lifeisstillgood 4y ago
This is onshoring - to the shores of a country whose national sporting league called The World Series. There is a distinctly USA centric view of the world :/)
- _-david-_ 4y ago
  MLB isn't a national thing. There are two countries (US and Canada) who have teams.
  - lifeisstillgood 4y ago
    Honestly I am not sure if that is sarcasm or not :-)
    - _-david-_ 4y ago
      It is not sarcasm. How could something strictly be a US thing when both the US and Canada partake?
philwelch 4y ago
It’s onshoring from the perspective of an American company that contracts out to TSMC fabs, such as Apple, AMD, nVidia, Marvell, Qualcomm, or other major TSMC clients. Sony is also a TSMC client so if TSMC built fabs in Japan, Sony would be onshoring.
- throwaway2037 4y ago
  Hsinchu, Taiwan, R.O.C., Nov. 9, 2021 - TSMC (TWSE: 2330, NYSE: TSM) and Sony Semiconductor Solutions Corporation (“SSS”) today jointly announced that TSMC will establish a subsidiary, Japan Advanced Semiconductor Manufacturing, Inc. (“JASM”), in Kumamoto, Japan to provide foundry service with initial technology of 22/28-nanometer processes to address strong global market demand for specialty technologies, with SSS participating as a minority shareholder. Ref: https://pr.tsmc.com/english/news/2880 https://pr.tsmc.com/english/news/2880

tester756 4y ago

People are cheap in semico in compare to building/equipment

WatchDog 4y ago

Semiconductors are probably one of the lightest products relative to their costs. So as you alluded to, the long distance logistics of delivering the finished products, have a negligent impact on it's price.

csomar 4y ago

Huh? This is re-shoring by political influence (probably pressuring Taiwan/TSMC) and financial incentives. Both TSMC and Samsung[1] are buildings Fabs in the US. Both Taiwan and South Korea are dependent on US military for their own existence. This is anti-competitiveness at its best. [1]: https://www.anandtech.com/show/16483/samsung-in-the-usa-a-17-billion-usd-fab-by-late-2023 https://www.anandtech.com/show/16483/samsung-in-the-usa-a-17...