A few days ago, The Japanese media “Nikkan Kogyo Shimbun” reported that TSMC‘s Arizona plant seems to be very difficult, and the “construction cost” alone is as much as 6 times higher than that of Taiwan. In addition, local regulations and various controls in the United States are different from those in Taiwan and Japan, and TSMC fears that it will be difficult to move the entire original “supply chain” there. In addition, high wages, low worker efficiency and strict labor laws in the U.S. will drive up the cost of products and make them uncompetitive, so TSMC’s plan to build a plant in Arizona may be difficult to realize.
The Japanese media report is based on the “general business model”, but ignores the fact that TSMC was invited by the U.S. Department of Defense to set up a plant in the U.S., mainly to produce chips for “military weapons”. Therefore, the “business model” of the Arizona plant is completely different from the general commercial fabs and cannot be inferred from the “general business model”.
Yes, the “construction cost” in the U.S. is high, because the U.S. building specifications are very strict and construction workers are more expensive. But the U.S. government and the State of Arizona must be “heavily subsidized”. Other issues such as “supply chain” and “high wages” affect the “high cost,” a shortcoming the U.S. Department of Defense can make up for. DoD procurement, especially for weapons manufacturing, is much more expensive than commercial supplies. Because the Department of Defense suppliers must pass the “national security review”, the requirements of quality is very strict, the purchase price will naturally be much higher. The Department of Defense does not lose money, because they sell weapons at a very high price. In short, it is not unprofitable to be a supplier to the U.S. Department of Defense.
Military Chips Produced in the U.S. Imperative
The U.S. has been committed to developing the most advanced weapons, such as flying bombs, warships, military aircraft, Drones, wireless communications, tanks, military satellites, navigation, etc. All of these modern high-tech weapons use a large number of wafers. However, many of the U.S. domestic chip production lines have already been moved overseas, so the U.S. Department of Defense is concerned that in the event of a military conflict, the “chip supply” may suffer disruptions. Especially under the increasingly tense situation of “U.S.-China confrontation,” it is imperative that military chips be “produced in the U.S.”.
Japanese media reports indicate that it is now Time for TSMC to “bargain” with the U.S. government, hoping that TSMC can ask for more, suggesting that it can hire a “public relations firm” to help facilitate negotiations if necessary.
TSMC was invited by the U.S. government to set up a factory in the U.S., which is an “honor” and an “obligation”. First of all, the high-tech weapons developed by the US are used to “defend the free world” against centralized countries such as China, Russia, and Iran. Taiwan is a member of the free world, and naturally has an “obligation” to assist the United States in developing weapons. Furthermore, with so many fabs around the world, the U.S. government would look to TSMC to show that TSMC is currently the world’s “leading fab”, which is an “honor” for Taiwan, and even our Taiwanese expatriates in the U.S. have a bright face.
TSMC is Taiwan’s “protector of the nation”, which is already the consensus of the Taiwanese. The other side of the story can be seen in the Japanese media: “TSMC will lose its competitiveness if it leaves Taiwan”. Taiwanese people are honest, hard-working and friendly, and their students have good performance in mathematics and science, which can produce many excellent and diligent engineers, which is the cornerstone of TSMC’s development.
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