Changing globalization trends factor in TSMC’s decision to expand in US: analyst

Changing globalization trends factor in TSMC’s decision to expand in US: analyst

2022-12-08

TSMC has caught the attention of many, after the firm’s decision to expand in the U.S. TSMC founder Morris Chang has said that it had long been his dream to open a fab across the Pacific, something he had previously opted against due to high costs and an assortment of labor and cultural issues. Experts say that, TSMC’s U.S. expansion is a symptom of the changing trends in globalization. And that, although problems still remain, the investment in the U.S. could bring new businesses opportunities to Taiwan.

At TSMC’s ceremony for its fab in the U.S. state of Arizona, it was all big names in the tech sector. Beside’s TSMC’s chairman, CEO and founder, there was also Apple CEO Tim Cook, Nvidia CEO Jensen Huang, Advanced Micro Devices CEO Lisa Su and even U.S. President Joe Biden, who hailed the moment as the return of American manufacturing.

Morris Chang (Dec. 6)
TSMC founder
My dream of 25 years ago will now be fulfilled by Mark.

Previously, high costs, labor problems and cultural differences had made investing in the U.S. a nightmare for TSMC founder Morris Chang, who had said investing in the U.S. was a costly affair and a wasted effort. Since then, his stance has done a full 180.

Morris Chang (Dec. 6)
TSMC founder
Globalization is almost dead. Free trade is almost dead. And a lot of people so wish they will come back. But I really don’t think they will be back for a while.

Lee Chun
Chung-Hua Institution for Economic Research
You’ve got to imagine it as if the world were spilt in thirds, each with its own tech companies and trade investment groups. It’s a revised version of globalization. In the past, production was concentrated in China and Taiwan. In the future, production will be spread in many different areas. So when countries turn into themselves and Taiwan goes out to service them, that brings Taiwan a lot of new opportunities.

The analyst says globalization has changed, in part due to the U.S.-China tech war. Taiwanese companies are having to follow their clients to other parts of the world, which according to him, is an opportunity for growth. But for TSMC, producing chips in the U.S. comes with costs about 50% higher than in Taiwan. The chipmaker has announced a total investment of US$40 billion in Phoenix, Arizona, with US$12 billion in the first phase and US$24 billion in the second. By 2026, the fab is expected to have an annual production capacity of about 600,000 chips in 2026, a minute amount compared with Taiwan’s output.

Chai Huan-hsin
Semiconductor industry analyst
Building up supply chains takes a long time. And in the U.S. there is more intrusion from non-economic factors. So if you want the fab in Arizona to make profits closer to fabs in Taiwan, I’m afraid that will take a very long time, more than five years.

Amid a changing geopolitical landscape, TSMC has expanded in the U.S. despite the higher costs. Even if orders pour in, will the firm’s profits be affected? It remains to be seen.