TSMC expects customers to pay more for chips fabbed overseas

TSMC boss C C Wei says customers who want to fabricate in the chip giant's non-Taiwan facilities will need share the cost by paying more. During the Q&A part of TSMC's Q1 earnings call, an analyst asked the CEO how the world's largest chip contract maker would cope with rising expenses, such as electricity, in order to achieve …

[codejunky]

Yeah

"TSMC boss C C Wei says customers who want to fabricate in the chip giant's non-Taiwan facilities will need share the cost by paying more."

And yet some people will be shocked that someone has to pay

[Anonymous Coward]

Re: Yeah

Have to pay for a US trade war, right?

[codejunky]

Re: Yeah

@AC

"Have to pay for a US trade war, right?"

If that is the decision of the US then yes

[Snowy]

Who would chose to pay more

Not many are going to care where it made more so if it is cost more.

On the other hand If your in the USA delivery cost and time should be cheaper and quicker so that could offset a higher price?

[DS999]

Re: Who would chose to pay more

You aren't looking at it correctly.

Consumers don't buy chips, they buy products that contain chips. Let's say a made in the US chip is 20% more expensive (I doubt it will be that much I'm just picking a number) but if that's only 10% of the cost of a product it only increases the manufacturing cost by 2%. That's not enough for consumers to care if they are comparison shopping, though it is harder to get them to care about the US made content of things that are never going to be 100% made in the US. You might make say a hammer in the US and be able to sell it as 100% made in the USA, but a phone or a car will never be 100% made in the US. But there's a big difference between something where 20% of the cost (parts/labor) is US versus 80%.

There aren't a lot of products using leading edge chips that are made in the US. That's mostly stuff like smartphones, PCs, and related products - pretty much all of which are "manufactured" overseas. It is cheaper to ship something from Taiwan to China (or Vietnam or India) than it is to ship from the US, though chips are so small the shipping cost is pretty much lost in the noise.

[Snowy]

Re: Who would chose to pay more

Was not talking about Consumers, was talking about the device manufactures who use the chips to make devices that Consumers buy.

2% less in manufacturing costs is 2% more profits.

[j2f8j8j2fj]

Sounds like a win for Intel now that they're getting into the contract fab business.

[rcxb]

That wasn't the deal

TSMC already got a ton of money up-front to compensate for the cost difference. Saying that wasn't enough and they want more on the back-end, forever, isn't going to go over well.

It's going to get ugly if they build a fab and let it sit idle because almost nobody (except military & spy agencies) are willing to pay extra for domestic US fabbed chips. If they produce a bit, at least the capacity will be there in case anything happens to the Taiwan fabs, transit from the area, or just a surge in demand.

[DS999]

Re: That wasn't the deal

No one can afford to let a fab sit idle. It costs around $30 billion to build a 2nm class fab, and it requires about 70% or so utilization just to pay the depreciation. Even with all the money the US is giving them TSMC will be in the hole for many billions building that fab, so leaving it idle is not a possibility.

TSMC has for the most part been at near 100% utilization on their newest nodes for the past decade, so they won't have any problem filling it. If there aren't enough customers who specifically want "made in the USA" chips willing to pay more, some who don't care where they are made will end up paying that higher price because the alternative will be not getting all the chips they need and being unable to make their products that need those chips.