By Adam Clark
Taiwan Semiconductor Manufacturing is going big on its investment in the U.S. That has raised concerns that its semiconductors will get pricier, but American-made chips might not be as expensive as feared, which is not good for Intel's hopes of eating into its market share.
Taiwan Semiconductor, or TSMC, is the world's leading manufacturer of advanced chips and is planning to spend a total of $165 billion on U.S. factories. That has raised some concerns -- TSMC founder and former chairman Morris Chang has said the cost of making chips at TSMC's existing Arizona site is 50% higher than Taiwanese production.
However, research firm TechInsights said Tuesday that such estimates are based on the costs of building an initial chip-manufacturing facility at a new site with an unskilled labor force and that costs soon come down once the factories are up and running and automated.
"Labor accounts for less than 2% of total costs. It's equipment that levels the playing field. Well over two-thirds of wafer cost is in the equipment. That's why the overall wafer cost difference between Arizona and Taiwan comes in at just under 10%," wrote Dan Hutcheson, vice chair of TechInsights.
That could be bad news for Intel, which is hoping to regain a significant role in advanced chip manufacturing under its new CEO Lip-Bu Tan and needs to attract at least one significant customer such as Nvidia or Broadcom to use it as an alternative chip manufacturer to TSMC. If TSMC doesn't need to charge a significant premium for U.S.-manufactured chips, that weakens Intel's case.
That doesn't mean all is lost for Intel. However, it does mean it has a narrow window of opportunity. The company has said its 18A process is poised to give it a technological lead in chip manufacturing against TSMC as soon as this year.
TSMC has already said it intends to manufacture chips using its newest 2-nanometer process in Arizona as early as 2028. However, that is several years behind its timeline for 2nm production in Taiwan.
Write to Adam Clark at adam.clark@barrons.com
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March 26, 2025 06:06 ET (10:06 GMT)
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