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Earlier this year, TSMC started producing chips at its plant in Arizona. Before that, there were talks about US chip production costs being higher than Taiwan’s. Also, comments made by the TSMC founder Morris Chang regarding high fab manufacturing costs created the buzz that producing chips in the US is way too expensive to be financially viable. However, it doesn’t seem to be the case, suggest analysts from TechInsights.
TSMC’s cost of production in the US is only slightly higher than in Taiwan
According to G. Dan Hutcheson from TechInsights, “It costs TSMC less than 10% to process a 300mm wafer in Arizona than the same wafer made in Taiwan.” For those who are unaware, a wafer serves as the foundation or base on which companies build electronic circuits.
TSMC’s wafer fab production cost in the US is nearly 10% higher, but it is certainly much lower than the 150% suggested by the company’s CEO. Even the tech pundits were expecting the cost to be higher than 120%-150%.
TSMC mostly automates its large-scale factory in Arizona, reducing labor costs
Furthermore, Hutcheson mentioned that the common notion is that the company’s labor costs in the US factories are higher than those in Taiwan. However, large-scale manufacturing facilities like the one in Arizona mostly rely on automation.
This means the labor costs associated with the production are just 2% of the total costs. This clearly shows that the expense difference between the US and Taiwan isn’t as huge as suggested by many. That’s why the overall wafer production cost difference between the two countries falls under 10%.
The analyst believes that TSMC’s $100 billion investment in the US decision is brilliant due to the marginally higher production cost than in Taiwan. The company also plans to expand its 2nm chip production to the US this year. That said, rumors suggest that the manufacturer will still charge a 30% higher price for chips made at its facilities in the US.
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