TSMC Arizona Operations Only 10% More Expensive Than Taiwanese Fab Operations

[AleksandarK]

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.



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[thesmokingman]

TSMC will eventually move their base here. They're on borrowed time, move or get taken out.

 

[Shihab]

Leading equipment providers like ASML, Applied Materials, and Lam Research charge similar prices globally

But tariffs aren't the same globally, and more importantly, most of the world isn't actively provoking the entire globe to not do business with them.

Also:
>says labour costs are insignificant.
>blames a 10% cost increase on new and unskilled workforce.
>analysis!

 

[bitsandboots]

Given that TSMC has fabs in multiple countries (not just taiwan, but china & japan) the comments from Chang about the challenges of doing business elsewhere such as the USA came across to me as a combination of cultural comfort level and work/life/salary balance of slave labor versus not.
And I think this part goes a long way:

Although US labor costs are roughly three times higher than in Taiwan, the heavy automation in modern fabs means that labor represents less than 2% of the overall cost.

To me its the same old game - you don't need to restrict your business only to places that rely upon abusive, cheap labor to make money - you can automate instead.
It seems TSMC already knew it and was already capable of doing exactly that, so, why the previous complaints from Chang?

Anyway, this isn't just about US v Taiwan v China, because, I don't see why the EU couldn't entice TSMC to put plants there too.

 

[TheLostSwede]

TSMC will eventually move their base here. They're on borrowed time, move or get taken out.

One fab in the US, one more planned vs. 10 in Taiwan, plus two more planned. Sure they'll move their base to the US...
Also, you clearly do not undertand the Taiwanese mentality.

Ok, to be fair, they have another fab they bought in the US as well.

 

[RandallFlagg]

I find it odd how this statement, not in the original 'The Chip Insider' article, managed to make it into Tom's and then was repeated by TPU as fact.

This is pure speculation on both parts, since this does not appear in the original source article at all (and the source apparently did in-depth research and analyzed down to minutia "The Strategic Cost and Price Model"):

"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. "

Counter point : Depending on the chip and quantity, I can easily see the above adding significantly to cost. It probably makes some kinds of lower volume lower cost chip fabbing economically impractical on TSMC nodes in the US.

The original article doesn't even mention it -> Link

Also the cost of labor in the US, somehow went from double in the original article :

While there is roughly a 200% difference between the US and Taiwan.

To triple by the time it made it to TPU:

Although US labor costs are roughly three times higher than in Taiwan..

 

[TheLostSwede]

Given that TSMC has fabs in multiple countries (not just taiwan, but china & japan) the comments from Chang about the challenges of doing business elsewhere such as the USA came across to me as a combination of cultural comfort level and work/life/salary balance of slave labor versus not.

Sorry what? The people that work at TSMC are some of the best paid in Taiwan. Yes, they work long shifts, but they also get paid for it. I can't speak for xina, but in Taiwan they make a lot more than even CEOs in other companies on the island. There's a reason why people want to work for them. Yes, it doesn't compare to some stupid salaries in the US, but you're not going to earn even close as much as you can earn at TSMC in other companies in Taiwan.
This is from 2022.

Annual salary for Taiwan’s TSMC workers exceeds NT$3 million in 2022 | Taiwan News | Mar. 3, 2023 11:20

Revenue driven by sales of HPC devices and chips used in automotive electronics | Mar. 3, 2023 11:20

taiwannews.com.tw

 

[bitsandboots]

Sorry what? The people that work at TSMC are some of the best paid in Taiwan. Yes, they work long shifts, but they also get paid for it. I can't speak for xina, but in Taiwan they make a lot more than even CEOs in other companies on the island. There's a reason why people want to work for them. Yes, it doesn't compare to some stupid salaries in the US, but you're not going to earn even close as much as you can earn at TSMC in other companies in Taiwan.
This is from 2022.

Annual salary for Taiwan’s TSMC workers exceeds NT$3 million in 2022 | Taiwan News | Mar. 3, 2023 11:20

Revenue driven by sales of HPC devices and chips used in automotive electronics | Mar. 3, 2023 11:20

taiwannews.com.tw

I don't see why they wouldn't be the best paid in Taiwan! They play a critical role to the island beyond.
But, when I said "work/life/salary balance of slave labor versus not." I meant that Chang was complaining previously that he thought TSMC USA wouldn't work well because something along the lines of "the Americans don't work as hard or for as long each day".
I found such comments silly, mostly about patriotism of Taiwan or ethnocentrism. Like yeah how horrible that people don't want to work excessive hours, perhaps different cultures have different work/life balance. The USA isn't even a bastion of work/life balance anyway. In the end, given the high automation of TSMC, I wouldn't be surprised if TSMC found success in the countries that were perceived to be a bad fit.

 

[RandallFlagg]

I don't see why they wouldn't be the best paid in Taiwan! They play a critical role to the island beyond.
But, when I said "work/life/salary balance of slave labor versus not." I meant that Chang was complaining previously that he thought TSMC USA wouldn't work well because something along the lines of "the Americans don't work as hard or for as long each day".
I found such comments silly, mostly about patriotism of Taiwan or ethnocentrism. Like yeah how horrible that people don't want to work excessive hours, perhaps different cultures have different work/life balance. The USA isn't even a bastion of work/life balance anyway. In the end, given the high automation of TSMC, I wouldn't be surprised if TSMC found success in the countries that were perceived to be a bad fit.

I'm not even sure I buy those pay differences in the first place.

From the linked to 2023 article: "TAIPEI (Taiwan News) — Employees of Taiwan Semiconductor Manufacturing Company (TSMC) were paid NT$3.175 million (US$103,711) in annual salaries on average last year, up 28.91% from the previous year."

And in the US, Intel's 2024 range is 59-98K:

Or this view :

In fact, it looks like parity in terms of pay.

Certainly, it is not double nor anywhere near triple.

 

[Wirko]

One fab in the US, one more planned vs. 10 in Taiwan, plus two more planned. Sure they'll move their base to the US...
Also, you clearly do not undertand the Taiwanese mentality.

Ok, to be fair, they have another fab they bought in the US as well.

Also, new nodes have always been introduced in Taiwan first, and as is seems now, this isn't about to change.

 

[R0H1T]

To me its the same old game - you don't need to restrict your business only to places that rely upon abusive, cheap labor to make money - you can automate instead.

I mean why don't you ask your effin greedy trillion dollar corps to pay more, especially the likes of Apple/Walmart/Exxon/Amazon et al

Spoiler

No wait maybe that's called "socialism"

 

[lexluthermiester]

They're on borrowed time, move or get taken out.

Um, I might be missing some context. Please explain more.

 

[thesmokingman]

Um, I might be missing some context. Please explain more.

Taiwan must act before China decides its fate - Asia Times

Taiwan has no time to wait. If it does, China will decide its future. Taiwan must act economically, diplomatically and militarily to ensure its survival.

asiatimes.com

 

[lexluthermiester]

Taiwan must act before China decides its fate - Asia Times

Taiwan has no time to wait. If it does, China will decide its future. Taiwan must act economically, diplomatically and militarily to ensure its survival.

asiatimes.com

Ah, I can see what you mean. Thank you. I just don't see that happening. China has been doing some crazy and unwise things, but such a brazen move? Just don't see an invasion happening. China simply isn't that dumb or foolish. However, crazier things have happened in recent years, so who knows at all.

 

[thesmokingman]

Ah, I can see what you mean. I just don't see that happening. China has been doing some crazy and unwise things, but such a thing? Just don't see an invasion happening. China simply isn't that dumb or foolish. However, crazier things have happened in recent years, so who knows at all.

Lmao, they will take back Taiwan. It's just a matter of time. Even Elon admits this. And this decision has kind of already been made for Chang. Don't move and get tariff'd to hell and eventually lose your silicon shield.

 

[lexluthermiester]

Lmao, they will take back Taiwan. It's just a matter of time.

We differ in opinion there. Western allied nations will not tolerate the same thing happening with Taiwan that happened with Ukraine. If China is looking to get stomped into the ground like bugs, let them try.

Even Elon admits this.

As brilliant as Elon can be, he's not a always right as he, himself, has proven..

And this decision has kind of already been made for Chang. Don't move and get tariff'd to hell and eventually lose your silicon shield.

Yeah, there's some merit to that point, but not for the invasion threat reason.

 

[N3utro]

Um, I might be missing some context. Please explain more.

There was a civil war in mainland China in 1927 to 1936 which resumed from 1945 to 1949. It opposed the People's Republic of China (PRC - communists) to the Republic of China (ROC - centrist/rightist party) . ROC lost and fled to independant Taiwan, ruling as an autoritative power at the beginning until transitioning to democracy since 1988.

Taiwan is only 100 miles away from mainland China. PRC view Taiwan as a leftover from civil war. Now that they consolidated power on the mainland they want to finish what they started during the civil war against the ROC = ending ROC and incorporating Taiwan into China territory.

Taiwan is backed by the US so they cant do this freely but due to the close geographic proximity of Taiwan and China it's probably only a matter of time until they make their move. Also US shielding taiwan is in great part due to the world dependance to TSMC, which is weakening due to the strategic production beeing shifted in the US.

 

[Wirko]

Ah, I can see what you mean. Thank you. I just don't see that happening. China has been doing some crazy and unwise things, but such a brazen move? Just don't see an invasion happening. China simply isn't that dumb or foolish. However, crazier things have happened in recent years, so who knows at all.

China will demand, and get, access to some of the tastiest products from TSMC, in exchange for peace. That's what I see as a more probable future than an invasion.

 

[thesmokingman]

We differ in opinion there. Western allied nations will not tolerate the same thing happening with Taiwan that happened with Ukraine. If China is looking to get stomped into the ground like bugs, let them try.

As brilliant as Elon can be, he's not a always right as he, himself, has proven..

Yeah, there's some merit to that point, but not for the invasion threat reason.

You might be a little crazy if you think Trump will start WW3 for TSMC. He will tariff the hell out them first, leaving no choice for them as I wrote. As for the west? What West? Who from EU will step in? They can't do jack about Russia, what do you think they will do far away in Taiwan?

There was a civil war in mainland China in 1927 to 1936 which resumed from 1945 to 1949. It opposed the People's Republic of China (PRC - communists) to the Republic of China (ROC - centrist/rightist party) . ROC lost and fled to independant Taiwan, ruling as an autoritative power at the beginning until transitioning to democracy since 1988.

Taiwan is only 100 miles away from mainland China. PRC view Taiwan as a leftover from civil war. Now that they consolidated power on the mainland they want to finish what they started during the civil war against the ROC = ending ROC and incorporating Taiwan into China territory.

Taiwan is backed by the US so they cant do this freely but due to the close geographic proximity of Taiwan and China it's probably only a matter of time until they make their move. Also US shielding taiwan is in great part due to the world dependance to TSMC, which is weakening due to the strategic production beeing shifted in the US.

This.

 

[RandallFlagg]

We differ in opinion there. Western allied nations will not tolerate the same thing happening with Taiwan that happened with Ukraine. If China is looking to get stomped into the ground like bugs, let them try.

As brilliant as Elon can be, he's not a always right as he, himself, has proven..

Yeah, there's some merit to that point, but not for the invasion threat reason.

You could just read what China's been saying.

Xi's buildup of the PLA \ PLAN (military) has a milestone year: 2027

China's navy (the PLAN) is already about the same size as the US', and should be significantly larger by 2030 (like 1/3 larger). What's more their navy is regional, our is spread throughout the world.

This is also why both control of the Panama Canal and the Red Sea (Houthi's) is an issue. The Red Sea is the way to transit the Mediterranean to the Pacific via the Suez Canal, while the Panama Canal serves the same purpose for fleets in the Atlantic.

If you choke these two corridors off, the US can't move its naval assets freely. This would give China a huge boost of having perhaps 3x or 4x as many ships in the region than the US and no way for the US to get reinforcements.

All these things are, conveniently, coming together for Xi's 2027 goal.

Also, I think you over-estimate what the west will do, or what it can do.

China-Taiwan 2027 Deadline: How China could crush Taiwan without firing a shot

Chinas military modernisation is accelerating, with President Xi Jinpings anti-corruption purge reshaping the Peoples Liberation Army (PLA) as it readies for a potential invasion of Taiwan by 2027. A recent U.S. intelligence report highlights systemic corruption within the Chinese Communist...

economictimes.indiatimes.com

 

[lexluthermiester]

You might be a little crazy if you think Trump will start WW3 for TSMC.

WW3? No. China is not that foolish. Forceful Naval blockade? Yes. Trump is and would be that bold and China knows this. China will not pick that kind of fight while Trump is in office. For all the faults of the Chinese gov, they know when to pick their battle. They will not pick this one. Not anytime soon anyway.

You could just read what China's been saying.

What they say is of no relevance. What they can and will do is at hand. Crazy though they may be, they are not fools. They will not pick a fight they know they can't win. It's as simple as that.

 

[maximumterror]

What I don't understand is why Americans want others to invest in their country, why don't they invest themselves?
The attitude and policy towards foreigners also seems a bit funny: some foreigners, who are just trying to survive in this world in the real hardships of life, they deport to hell knows where, but other foreigners they ask to invest in America and raise the economy. Those calculations and assessments seem even funnier when you realize that those billions fell to TSMC out of nowhere, out of the sky, and nothing will become much more expensive anywhere.

 

[N3utro]

What they say is of no relevance. What they can and will do is at hand. Crazy though they may be, they are not fools. They will not pick a fight they know they can't win. It's as simple as that.

I think the issue is proximity. If China decides to blitzkrieg Taiwan with naval and aerial forces i dont think the US will have enough time to respond with as much forces, as geographically they are 10k miles away. Plus they have to protect South Korea and Japan as well. But nobody can know for sure. Time will tell.

 

[R0H1T]

Unless they plan to do it using teleportation, such a massive buildup would be visible for miles & more importantly over space. There's also lots of other major nations which should be able to spot such a move.

This would be of large consequence to any other nation with maritime or land border issues with China. So Taiwan being "reintegrated" will not go down well with them!

Now whether they act if push comes to shove is another matter.

 

[lexluthermiester]

I think the issue is proximity.

True, but then again..

If China decides to blitzkrieg Taiwan with naval and aerial forces i dont think the US will have enough time to respond with as much forces.

We have a very strong Naval presence at Japan, which is minutes away and swiftly, easily re-enforced.

Plus they have to protect South Korea and Japan as well.

Both of them can defend themselves until re-enforcements arrive. China would be utter fools to try that. It will only end poorly for them. That tactic has zero chance of victory.

Additionally, such actions would have the side effect of China be financially isolated from all but one of it's largest economic markets. They will not do that.

Time will tell.

True..