Tuesday, March 25th 2025
TSMC Arizona Operations Only 10% More Expensive Than Taiwanese Fab Operations
A recent study by TechInsights is reshaping the narrative around the cost of semiconductor manufacturing in the United States. According to the survey, processing a 300 mm wafer at TSMC's Fab 21 in Phoenix, Arizona, is only about 10% more expensive than similar operations in Taiwan. This insight challenges earlier assumptions based on TSMC founder Morris Chang's comments, which suggested that high fab-building expenses in Arizona made US chip production financially impractical. G. Dan Hutcheson of TechInsights highlighted that the observed cost difference largely reflects the expenses associated with establishing a brand-new facility. "It costs TSMC less than 10% more to process a 300 mm wafer in Arizona than the same wafer made in Taiwan," he explained. The initial higher costs stem from constructing a fab in an unfamiliar market with a new, sometimes unskilled workforce—a scenario not typical for mature manufacturing sites.
A significant portion of the wafer production cost is driven by equipment, which accounts for well over two-thirds of the total expenses. Leading equipment providers like ASML, Applied Materials, and Lam Research charge similar prices globally, effectively neutralizing geographic disparities. Although US labor costs are higher than in Taiwan, the heavy automation in modern fabs means that labor represents less than 2% of the overall cost. Additional logistics for Fab 21, including the return of wafers to Taiwan for dicing, testing, and packaging, add complexity but only minimally affect the overall expense. With plans to expand domestic packaging capabilities, TSMC's approach is proving to be strategically sound. This fresh perspective suggests that the apparent high cost of US fab construction has been exaggerated. TSMC's $100B investment in American semiconductor manufacturing reflects a calculated decision informed by detailed cost analysis—demonstrating that location-based differences become less significant when the equipment dominates expenses.
Sources:
TechInsights, via Tom's Hardware
A significant portion of the wafer production cost is driven by equipment, which accounts for well over two-thirds of the total expenses. Leading equipment providers like ASML, Applied Materials, and Lam Research charge similar prices globally, effectively neutralizing geographic disparities. Although US labor costs are higher than in Taiwan, the heavy automation in modern fabs means that labor represents less than 2% of the overall cost. Additional logistics for Fab 21, including the return of wafers to Taiwan for dicing, testing, and packaging, add complexity but only minimally affect the overall expense. With plans to expand domestic packaging capabilities, TSMC's approach is proving to be strategically sound. This fresh perspective suggests that the apparent high cost of US fab construction has been exaggerated. TSMC's $100B investment in American semiconductor manufacturing reflects a calculated decision informed by detailed cost analysis—demonstrating that location-based differences become less significant when the equipment dominates expenses.
55 Comments on TSMC Arizona Operations Only 10% More Expensive Than Taiwanese Fab Operations
The only military asset China has working in it's favor is it's airforce. But while they are the largest airforce in the world, they are not as advanced compared to Taiwan, Japan and the US. That is the only arena where their military stands a chance. And to be fair, they have some might in that arena. But would such a show of force be wise or even effective? My guess is no.
China has a population pool of men around 20+ times larger than most other countries(with the exception of India) when it comes to military drafts, so they don't need to have superior tech. All they need is enough bodies, military equipment/vehicles, and competent leaders.
As it currently stands, the US is not in any shape to fight a conventional war with a near-peer adversary like China. Our conventional arsenals are nowhere near what they were during the Cold War. Sure, we have superior equipment & tech, but not in sufficient numbers for such a conflict and I highly doubt in this current age of technology, speed, cyber-attacks, etc., that such adversaries are going to give us the time to ramp up manufacturing like they did in WW-II. Both China & the US would suffer greatly from such a conflict along with Taiwan being turned into an island of rubble. The mainland US is no longer a near-impossible target like it once was from direct attacks by enemies during a war.
Regardless and back on topic, TSMC's presence in Taiwan will continue to be strong. They have wisely branched out to cover all of their bases.
That's pretty great wage for Asia for sure. Even in North America that would be really good.............for a 2080hr no OT work year.
I guess the question I have is............that 10% is that with or without inclusion of the tariffs?
edit - I was not aware of this...........interesting
taiwannews.com.tw/news/5957482
Imo, I think countries should have stuff they need produced within their own borders. Otherwise you just end up with another DeBeers pilfering those countries through assymetric or one-sided trading.
One of my more politically-minded friends has said to me repeatedly "international trade is what prevents war. You have something they want, they have something you want, trade means you don't have to fight each other for it". With Taiwan potentially giving up their proverbial trump card it strikes me that they could be putting themselves in danger.
(Note that I am all for TSMC diversifying their install base purely from a redundancy perspective. I just don't want Taiwan to get invaded!)
Trade can either discourage wars, or it can cause nations to "kick the can down the road" & make them bigger & worse in the long run. Its not necessarily a solution. Sooner or later trade & economics take a back seat depending on what's to be gained/lost from war vs. what's to be gained/lost from not going to war.
The US' ability to build ships in WW II was directly attached to its prowess in building up merchant ships.
This was a direct result of a program the US Gov't started in 1937 to upscale its maritime shipbuilding capacity.
Ref: www.maritime.dot.gov/sites/marad.dot.gov/files/2024-07/FACT%20SHEET%20for%20DOMESTIC%20SHIPBUILDING%20%28JULY%202024%29_0.pdf
Ultimately these buildups resulted in the US flagged fleet of over 4400 ships, with the military having over 1100 including 99 aircraft carriers at the end of WWII.
Today, things are very different though. We were ready for WW II. China is ready for WW III. We are not.
Yes, that's right. China puts out 510X more tonnage in maritime ships than the US does.
If they shift this to a wartime footing, we'll be the Japanese with the superior tech and training - China will be the sleeping giant.
Any extended war of attrition, we lose. Just like WW II. Japan had a shot, they had to hit hard and eviscerate our navy and more importantly - our capacity to build more ships.
They failed, and lost the war.
The roles are reversed now. The US will lose any extended conflict with China.
Also, for the record, China is laying down far more new military ships than the US is and has been for years. So not only are they making more military ships, and have more, they have a lot of commercial capacity to shove into making even more - just like the US did in 1941.
Regardless, your not taking all things into account. We could debate this back and forth for days, neither one of us definitively winning the debate.
We're off-topic enough anyway. I digress.
One of the leading arguments for limiting US support for Ukraine is that the conflict has depleated our stockpiles and we are not producing at a replacement rate, and that conflict is a much smaller scale than a war with China.
The nature of war has also changed. Small, mass produced drones pose a huge threat to a conventional military such as ours, and our carrier battle groups haven't really been tested against an enemy with plenty of proper cruise missiles.
A war with China isn't some kind of slam dunk for the US like Iraq. There are definitely odds that we would lose, China would take Taiwan, and the world would become a substantially worse place, complicated further by the current political climate of alienating all of our allies and installing buffoons in high ranking positions.
First to shelf, first to sale. That's the message.Super Japan 2.0 :pimp: That's all I have to say about this.
I'm starting to miss the daily talks from my one VR insider talking about the great ape (China) beating its war drums about TW whenever ANY mention...Those were fun times.
a GPU can have 1000 component , 1 left the gpu dont work :90% from sand to pcb come from chinachina make every year now more army ship than the entire french battleship ...
You also have to understand that xina wants TSMC if they were to invade, so their goal would be to prevent any kind of damage to TSMC and its fabs.
So far, a much bigger threats to TSMC are the regular earth quakes, typhoons and the increasingly common droughts in Taiwan, as TSMC needs a lot of water to operate, even though they've gotten better at recycling it.The issues is that the glorious leader has said that Taiwan will be ruled by xina and that xina will take the islands by force if they must. He can't go back on his word, as that would make him look weak, which could cause him to lose power...
Taiwan (as a territory) was first brought under Imperial China control during the Ming Dynasty, then as the Qing Dynasty took over in the 17th Century the remnants of the Ming Dynasty fled there (until they were taken over by Qing forces in ~1683)
China lost the first Sino-Japanese war in 1895 and gave up Taiwan (and renounced its influence over Korea, paving the way for Japan to annex Korea just prior to WWI), but Taiwan was officially returned to China after it lost WWII.
the key part here that is the important part: Taiwan was given up by the Qing Dynasty in 1895, the ROC was founded in 1911 but lost the mainland part of the Civil War in 1949 and fled to Taiwan, but at that time there were already two "Chinas" - PRC founded in 1949 and the ROC which only ruled over Taiwan and some minor islands.
while it is true that the KMT ruled under martial law until 1988, Taiwan was not "independent" and a large part of the Taiwanese independence movement centers around this grey area.
so to say "independent Taiwan" is glossing over a lot of the background info that helps people to understand why 1) China wants to invade Taiwan so badly, and 2) why Taiwan is under US protection (which mostly stems from the need to stop communism starting in 1950 when the Korean War broke out, prior to that the US was essentially giving up on the ROC government... otherwise if communism conquered Korea, then the next target would have been Japan, which the US spent way too many lives fighting against and didn't want to lose)
(context - I was born and raised in Taiwan. I have many family members deeply associated with the KMT, but my dad's side is like 300 years of history rooted in Taiwan, so I have a very deep and unique perspective of what happens there)fixed for you - Taiwan's naval forces do not exist in any meaningful capacity, their best ships are essentially leftover from the 1970s (Kidd-Class destroyers for example were originally built for Iran prior to 1979) - so you can leave Taiwan out of this.
Taiwan has been wanting to buy ships with AEGIS capability for the last 20 years, but the US refuses to transfer this technology to them. so until then, they can only rely on the US 7th Fleet and Japan to help defend.
Taiwan's entire defensive capability is built around destroying as much of the invasion fleet landing capability during the initial assault, and bottlenecking landing craft capability as there are not a large amount of beachheads suitable to land on. But the real strategy is to buy the island approximately 72-96 hours so allies (presumably US/Japan) can respond in time before it is too late to repel the attack.