8 April 2024
If you are covering the news that Taiwan Semiconductor Manufacturing Co (TSMC) has agreed to make products in Arizona from 2028, please see comments below from Ben Barringer, technology analyst at Quilter Cheviot:
“The announcement that Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest chipmaker, will begin manufacturing its most sophisticated products in Arizona by 2028 marks a significant stride in the Biden administration’s campaign to repatriate the semiconductor supply chain.
“This move is underpinned by substantial financial incentives, with TSMC receiving $6.5 billion in grants and $5 billion in loans. To put this into perspective, these figures represent a considerable portion of TSMC’s annual capital expenditure, which stands at approximately $30 billion per annum.
“For TSMC, the financial boost is considerable. However, it’s essential to view this development within the broader context of TSMC’s global diversification strategy. Currently, TSMC operates two fabrication plants (fabs) in China and the United States, with additional facilities in Japan and Germany. The new fabs in Arizona will augment this international presence, yet TSMC’s operations will remain predominantly Taiwan-centric, with 12 out of their 21 fabs located on the island.
“From an investment standpoint, while the expansion into Arizona is noteworthy, it’s crucial to recognise that TSMC’s capacity is still heavily concentrated in Taiwan. Thus, the news is positive but should be weighed against the overall manufacturing portfolio.
“The root of this development is in the Chips Act, legislation that predates President Biden and originated during the Trump administration. The enactment of this act has been a protracted process, but its effects are now materialising, benefiting a range of companies within the semiconductor industry.
“Intel, in particular, has emerged as a significant beneficiary, poised to receive about $20 billion. Samsung, another key player in the sector, is expected to obtain around $6 billion in grants. The distribution of funds appears to favour Intel, positioning them as the primary recipient of the act’s largesse.
“In conclusion, while this development underscores TSMC’s ongoing diversification efforts, the concentration of its operations in Taiwan remains a dominant factor.”
