TSMC’s facility in Arizona symbolizes a significant milestone for the American chip industry, but escalating costs are impacting profits and adding strain to the company’s operations.
Escalating Costs of TSMC’s US Operations
Investments by Taiwan’s chip giant in the US were initially viewed as a positive step, potentially enabling America to have an independent supply chain. However, reports suggest that TSMC’s US operations have experienced a dramatic quarterly decline in profits, dropping from NT$4.232 billion to NT$41 million. This downturn is associated with the extensive semiconductor expansion the company is undertaking, coupled with plans to introduce high-end nodes in the US, which are also driving up expenses.
TSMC’s Arizona facilities are not only strategically important for America’s chip industry but also for establishing a supply chain less susceptible to geopolitical conflicts. TSMC was quick to invest in the US due to customer preference for US manufacturing, a trend that intensified during the Trump administration. Yet, building a chip supply chain in the US is proving to be significantly more costly.
The Future of High-End Node Production
Sources indicate that TSMC’s Arizona Fab 2 is likely to see reduced profitability due to the push for creating production lines for advanced chips, such as 3nm, which necessitates costly process equipment. While the first facility in Arizona was successful with its focus on mature nodes, the surge in AI-driven demand requires TSMC to swiftly adapt to maintain operations and satisfy clients.
Manufacturing in the US involves higher costs stemming from labor, construction, and a talent pool primarily from Taiwan. As TSMC pushes for high-end nodes like 3nm and beyond, the profitability of its US operations will likely remain lower compared to other regions. **This push for advanced chip manufacturing in the US is driving up operational costs, impacting TSMC’s profitability.**