TSMC to Introduce Location Premium for Overseas Chip Production

[evernessince]

Any one who has worked with companies or teams in Asia should not be surprised. There is a reason people jump off of FoxCon buildings over there. TSMC is likely not as bad but this is not new. TSMC/AMD/Intel/Nvidia are not "good people" and will do what ever they want/what ever it takes to make a buck that fits with in their company culture.

Oh for certain none of those companies are the 'good guys'. We can only hope that there is enough competition in the markets to keep prices for consumers fair and the innovation plowing ahead.

 

[cvaldes]

Oh for certain none of those companies are the 'good guys'. We can only hope that there is enough competition in the markets to keep prices for consumers fair and the innovation plowing ahead.

There are tons of chip designers on the planet. That's not the issue.

The more immediate problem is the number of chip foundries.

Most have bowed out. About 10-15 years ago there were a dozen. Now we can count high-end cutting edge semiconductor foundry companies on one hand.

 

[LabRat 891]

Oh for certain none of those companies are the 'good guys'. We can only hope that there is enough competition in the markets to keep prices for consumers fair and the innovation plowing ahead.

Massively restricting EUV (etc.) fabtooling, has not helped things.
As cvaldes points out, the 'state of the art' fabs have consolidated into (less than a) handful of options.

On the other side of this coin:

US sanctions transform China into legacy chip production juggernaut — production jumped 40% in Q1 2024

The U.S. purposefully excluded older chips from its export sanctions.

www.tomshardware.com

The 'competition' could be in 'commodity' and 'legacy' chips. But now, one party is on its way to a de facto monopoly.

 

[evernessince]

There are tons of chip designers on the planet. That's not the issue.

The more immediate problem is the number of chip foundries.

Most have bowed out. About 10-15 years ago there were a dozen. Now we can count high-end cutting edge semiconductor foundry companies on one hand.

Both are an issue, hence why I said markets. "tons of chip designers on the planet" and yet memory and NAND manufacturers fix prices routinely as did monitor panel manufactuers did and as GPU manufactures are now. There are only a handful of both fabs and chip-designers that make cutting edge products.

 

[cvaldes]

And yet the topic is TSMC which is not involved in NAND production. Stop diverting the discussion to your benefit.

This is happening on a more increasing basis here at TPU (and elsewhere) which doesn't benefit anyone.

 

[starfals]

Can't wait for a 2000 bucks 5080! Bring it on! It's no wonder why everyone is buying PS5, and nobody cares about gaming GPUs here. I barely see anything selling in the major stores. I mean, a PS5 is literally 380-400 bucks. That can't even get a decent GPU from the most recent series, especially how a 4070 alone is 700 euro here. Yes, 700... and that's the worst models. If you want GB or Asus, you gotta pay 750-800. Fun. Imagine how much a 4070ti super cost, if a regular 4070 (non super, super cost more here) is 700 bucks. Just imagine. Also also, 4080 is NOT 1000 or even 1100 Euro here, its more.

Funny, cus PC gaming was totally owning console gaming for quite a while. Now, tides are turning once again. Stores are full of GPU's, and PS5 are sold even before they are shipped to my country. That's what people care about i guess. Not me... of course. I'll buy a 5080 even if its, 2300 euro. I don't enjoy console gaming with a controller, thank god most PS5 games are coming to the PC. I do understand why consoles are hyper popular, i get it. In fact, more power to it. People are smarter than me, they ignore the BS prices of Nvidia/AMD, they go for the reasonable thing. Nvidia won't care even if PC gaming died, that much is obvious now. Their main income comes from other places now. Console makers are the only ones that seem to care at all. Im sure TSMC will raise prices even more in 2025/26. There is little backlash to them doing it now, which probably might make them more ballsie in the future.

 

[mb194dc]

Chip production is notoriously cyclical and to me, all these extra fabs are likely to mean massive over capacity in the next few years. Ultimately demand will dictate the price.

The market is way too optimistic on "AI" for the medium and long term, and there's few use cases outside of that that actually need newer chips. In a poor economic environment, upgrade cycles will lengthen out and the market for new chips will collapse.

Most importantly, for "AI" demand to even remotely meet expectations, you need a front end application people will actually pay big money for. When I see sysadmins laughing about how crap CoPilot is, that is not very encouraging!

 

[Denver]

Once again we have a comment from someone who has clearly never worked for a Fortune 500 company, probably has never made anything before in his/her life.

There's a lot more in an integrated chip than just the wafer. And it's not just semiconductors, pretty much everything is like that.

It's like saying the price of blue jeans should come down because cotton futures prices dropped 5%. Same with wheat. Or crude oil.

Guess what? The gasoline you pump into your car (assuming you still have a fossil fuel powered vehicle) is not just crude oil. It takes resources to move that crude oil to a refinery. The refinery requires a lot of electricity and manpower to run. The finished gasoline is then transported elsewhere where it's finally put into delivery trucks (driven by human beings who have rent & bills to pay, kids to raise, etc.) and brought to refueling stations. And those pumps aren't free, they have software, need electricity, maintenance, etc.

The wafer itself is just a fraction of the total amount of the cost of an integrated circuit. It still takes an enormous amount of resources just to create the chips, electricity, water, EUV lithography machines from ASML, whatever. And all run by people who -- like fuel delivery truck drivers -- also have rent & bills to pay, kids to raise, etc.

And as some people pointed out, these costs aren't the same all over the world. With your observational skills you probably haven't noticed it, but gas isn't the same price everywhere.

Anyhow none of this surprises me in the slightest. Part of it is likely to prod governments to provide more subsidization in exchange for lower overseas premiums.

This is a rather arrogant and unnecessarily long statement to simply point out the obvious, which in itself counters the initial point.

A 30% increase in the price per wafer can have a significant impact, especially when considering the cumulative effect of profit margins at each stage of the supply chain, from AMD/Nvidia to AIBs to shoppers/importers/suppliers plus taxes.

 

[TheLostSwede]

I understand, but labor expenses are just a fraction of the overall costs. I just assumed that billion-dollar subsidies would translate into "discounts". After all, why not reduce profit margins slightly for "mature" processes that no longer require substantial investments in research and development? It would make sense.

Labour is required for every step in building a fab as well, plus all the labour of companies supporting the fab once it has been constructed. Add to that the fact that costs in general are much much higher in the US compared to Taiwan, so I'm not at all surprised. Japan is not that different either for that matter, except food costs, as they're very reasonably for the most part in Japan.

TSMC is getting subsidies everywhere they operate, including Taiwan. If it wasn't a publicly traded company, profit margins wouldn't matter as much, as for one there wouldn't be people like Warren Buffet who dumped his entire investment in TSMC a while back, which caused their stock price to crash temporarily. Not having to care about shareholders is a freedom few big companies enjoy.

The equipment cost isn't that different for 7 nm compared to 4 nm, at least not enough that it would make a huge difference in price for what you get out at the other end of the process. Right now, all the materials used have also gone up in price, especially as there often aren't more than one supplier for some parts, like this Japanese company, whcih in all fairness hasn't increased their pricing https://www.japantimes.co.jp/business/2023/12/04/tech/fuso-chemical-chip-materials-prices/

Then we have the likes of silicon wafer manufacturers that can deliver good enough wafers quality as an example. Ok, there are actually a handful companies that are good enough and can deliver 300 mm wafers, but prices have gone up on their side as well.

Lots of things would make sense from an outside perspective, but the reality is that it might not be as easy as we think it should be.

 

[remixedcat]

And this kills it for consumer electronics and puts customers of these fabs as purely private corporate projects and military and government only. And our (public) tax money is what funded this in the first place.

I hope China reminds TSMC why we are paying to have them manufacture away from their death-grip.

I would be upset about this obvious bait & switch from TSMC if I was a non-corrupt senator that just agreed to pay $7 billion tax Dollars to get them to build there, too bad there's no such thing as a moral and honest politician.

yep.. completely defeated the purpose