Joe Biden and Tim Cook in Arizona: Ben Thompson is not in a celebratory mood

"I don’t want to be a wet blanket here, but, well, I’m going to be a bit of a wet blanket."

From "TSMC in Arizona, Arizona Challenges, Realities and Motivations" ($) posted Wednesday to Stratechery subscribers:

Start with the announced switch to 4-nanometer chips: as I’ve noted previously, TSMC’s 4-nanometer chips, branded N4, are just an evolved version of the company’s 5-nanometer process, which was first introduced in 2020 with the iPhone 12; calling it 4-nanometer is pure marketing...

In short, if that first fab comes online in 2024 (which is no sure thing — more on that in a moment), it will be, in the most generous interpretation, 2 years behind 4-nanometer production in Taiwan, and if we’re being honest, 4 years behind the 5-nanometer generation that said factory will be producing...

What is somewhat ironic about this 2~4 year delay in leading edge nodes is that it roughly mirrors the delay that Washington D.C. has traditionally put on foreign chip manufacturing, particularly in China. It’s a testament to how the U.S. has fallen behind on the leading edge that being granted two to four-year-old technology on U.S. soil calls for all of this pomp and circumstance.

That pomp and circumstance is, though, clearly the biggest driver here: notice how all of these announcements are coming from the White House, not TSMC; TSMC, if they had their druthers, would certainly not be building these fabs at all...

From what I have heard the culture clash between US-sourced employees and Taiwanese ones is massive; TSMC has the advantage of being a very prestigious and well-paying job in Taiwan, which helps compensate for the intense work hours and always being on call. It’s not a culture that most U.S. employees are used to, which in part undergirds the point that the reason the U.S. has fallen behind on chip manufacturing does, in many respects, rest more on the “manufacturing” part than the “chip” part...

And yet, here we are: TSMC is investing more in a location it doesn’t want to, to build chips that will be more expensive than those built in Taiwan, and everyone is celebrating.

My take: I defer to Thomson, who is well-placed to write about this stuff from his home base in Taiwan.

15 Comments

  1. Gary Gouriluk said:
    You have to walk, before you can run.

    4
    December 7, 2022
  2. Lalit Jagtap said:
    Don’t worry Ben fortunately more motivated and talented engineers from other countries are happy to move to move to Arizona to be on the call 24 hours to run TSMC plant. Plus schools like Purdue has started program last summer to help with engineering talent to operate such a plants.

    7
    December 7, 2022
  3. Jerry Doyle said:
    When Ben Thompson speaks, I listen. Little doubt there is merit to his allegations. It doesn’t take a rocket scientist to know that building these chips in the US is not competitive due to higher costs, lack of sufficiently trained labor, and government regulatory hurdles. Having made that observation can someone explain to me why TSMC is proceeding forward with a planned $43,000,000,000 investment in the US?

    Words are cheap to say this path is flawed. But TSMC is planning to invest 43 BILLION dollars! That isn’t cheap! So reconcile for me this allegation of a flawed path forward if the parties involved plan to invest 43 Billion???? Something doesn’t make sense.

    5
    December 7, 2022
    • Bart Yee said:
      I’ll take a stab:
      1) TSMC is a Taiwan pillar in every sense. Investing into the US at the US’ insistence (and carrot dangling) intertwines further US support of Taiwan and its existence, extending, not weakening Taiwan’s “silicon shield” status as an important independent country and tech powerhouse. IMO, this is a long play for both Apple and TSMC for their own supply chains as well as US domestic appeasement, same with Samsung and Intel building new fabs in the US.

      I’ll note that neither Samsung nor Intel (nor Global Foundries) will be building bleeding edge fab processes in the US either because neither one has that even close to operation now or in the near future in their current fabs, both still working out major bugs and production yield issues.

      IMO, TSMC is still retaining its most advanced future processes (with ASML’s help) for Taiwan development and deployment because it has the tightly controlled infrastructure, IP, knowledgeable and skilled engineering & labor force, plus Taiwanese government and nationalistic support to make it work. For the Arizona project, TSMC is REPLICATING a working, up and running N4e process to ensure successful, hopefully on time and on-budget completion, rather than trying to CREATE a bleeding edge (at least initially) still working out the bugs 3nm process in both Taiwan and the US, thus splitting and diluting their considerable talent.

      You can’t divide an army and fight on two fronts and expect to win unless you have all the supply lines, logistics, reliable tools (weapons) and most importantly, the workers (soldiers) who are properly trained, ready, and willing to be led in the manner they can be led. Even with that, a second front is always a gamble. TSMC is trying to maximize its opportunities for relative success in AZ.

      10
      December 7, 2022
      • Jerry Doyle said:
        @Bart Yee: Thanks, Bart Yee for an excellent and cogent response to my question. You have a proven track record of such and truly are an asset to this group.

        5
        December 7, 2022
    • Brian Nakamoto said:
      Hi Jerry! TSMC is incentivized by the bipartisan CHIPS and Science Act (https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/), and it probably helps that a major customer of theirs would like to claim more domestic sourcing too. Rockets and most other essential tech that keeps our military and economy running don’t need the latest-greatest (low yield) fab process.

      2
      December 7, 2022
      • Jerry Doyle said:
        @Brian Nakamoto: Agree, brother Brian N. I was aware of the legislative enactments along with the Executive Branch support. Thanks for reminding me of the industrial-military angle of which I remember reading about, but since forgot.

        0
        December 7, 2022
  4. S Lawton said:
    Oh, dear. Foxconn Wsconsin?

    3
    December 7, 2022
  5. Daniel Epstein said:
    Is labor after a Fab is built and running a large % of chip costs? Probably not as big as assembly of devices. This is a big insurance play by TSMC and others including Apple. Not quite as speculative as Foxconn in Wisconsin was. If in the future Apple asks TMSC to upgrade the Fab processes In Arizona they will likely do it. The interesting thing is they see the need for the production of the older technology as well. Assuming they know how to spend their own money.

    9
    December 7, 2022
    • Bart Yee said:
      Foxconn Wisconsin was a failed initiative to appease and promote a specific political ambition with pretty much both sides having vague and poorly focused ideas of what the tax breaks / incentives were going to buy / support what Foxconn was planning to produce. First it was to be a LCD or TFT displaysfactory for large and small screen TV’s, a cutthroat business that Foxconn had little experience as a supplier, not an assembler. Secondly, by the time shovel was to hit dirt, political winds had changed as well as the economics of Foxconn’s expansion plans.

      Today, 3 buildings, and R&D center, maybe a small TFT manufacturing building and an affiliate company building occupy the site. Foxconn renegotiated it’s agreement with Racine County for smaller tax incentives in exchange for less job creation requirements and NO specific requirement on what, if anything, Foxconn would make there.

      Details here:
      theverge dot com /23030465/foxconn-lcd-factory-wisconsin-alan-yeung-trump-scott-walker-wisconn-valley-dome-decoder-interview

      4
      December 7, 2022
  6. Fred Stein said:
    Ben is right and wrong at the same time. TSMC knows the issues Ben cited. Their founder, Morris, has already made these points. Yes, it is political. No new insight, nor wet blanket.

    The only question for Apple investors is whether TSMC can retain its lead, while complying with the US and global political exigencies. The answer: YES. Apple retains its lead too.

    8
    December 7, 2022
  7. David Emery said:
    I certainly hope Ben does not have to endure a situation where China embargoes Taiwan, or worse…

    1
    December 7, 2022

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