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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

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.

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.