[Chip News from Taiwan] US-Made TSMC Chips Are 20% More Expensive Than Taiwanese Ones... Clients Say "They're Worth It"

Arizona Wafer Plant Unveils First Chips
Product Prices Rise Due to Construction and Labor Costs
AMD: "New Products Are Expensive, But Production Will Continue"
TSMC Seeks Ways to Lower Prices

TSMC, the world’s leading foundry (semiconductor contract manufacturing) company, has set a significantly high price for chips produced in the United States. However, its clients continue to express strong confidence in TSMC, indicating their willingness to accept these higher prices.

On July 26, Taiwanese media outlets such as Economic Daily News highlighted the remarks of AMD CEO Lisa Su, who attended the "Winning the AI Race" summit held in Washington, D.C. on July 23. Su’s comments, which demonstrated unwavering trust in TSMC, were widely reported and given considerable significance.

At the summit, CEO Su stated, "The cost of chips produced by TSMC in Arizona is 5 to 20 percent higher than those made in Taiwan, but they are worth it." This marked the first public response from a client CEO following the announcement of the specific pricing for TSMC’s US-made chips, drawing significant attention.

TSMC began operating its first wafer fabrication plant in Arizona in the fourth quarter of last year. Major clients’ chips are now being produced at this facility. With the first physical chips recently unveiled, industry attention has focused on their pricing. TSMC and its supply partners have revealed that chips produced in the US are on average 5 to 20 percent more expensive than those made in Taiwan. The higher prices are attributed to the astronomical costs of building the plant in the US, the deployment of personnel from Taiwan, and the labor costs for employees hired locally in the US.

Despite these factors, AMD, one of TSMC’s key clients, has reaffirmed its commitment to entrust TSMC with the production of new products, even at higher prices, creating a sense of optimism in Taiwan. AMD is one of TSMC’s largest clients, second only to Nvidia. AMD was the first to place orders for 4nm (nanometer, one-billionth of a meter) process semiconductors from TSMC’s Arizona plant and is expected to produce 2nm process chips for its "EPYC Venice" data center CPUs at the upcoming third Arizona plant. CEO Su commented that "the yield rate at TSMC’s Arizona plant is already comparable to that of the Taiwan plant," and she does not anticipate any significant issues with chip production. She added, "We must also consider the resilience of the semiconductor supply chain, as learned during the COVID-19 pandemic," emphasizing the need to diversify chip production across both Taiwan and the US to strengthen supply chain resilience.

Despite the high prices of US-made chips, there have been no reports of clients such as AMD terminating deals with TSMC or seeking to renegotiate prices. As a result, the high initial prices are expected to remain in place for the time being. However, there is a possibility that these prices may eventually decrease to levels comparable to those of Taiwan-made chips, as TSMC is actively seeking ways to lower costs.

TSMC’s long-term project to build six wafer fabrication plants, two advanced packaging facilities, and one research and development (R&D) center in the US is also part of these efforts. Manufacturing clients’ chips locally in the US can reduce additional costs such as shipping and may result in substantial tax benefits from the US government. These factors could contribute to lowering chip prices. Meanwhile, TSMC has announced that it will introduce state-of-the-art manufacturing processes at its US facilities without compromise. The first wafer plant in Arizona utilizes the 4nm process, the second will use the 3nm process, and the third and fourth plants are set to adopt 2nm and A16 processes, respectively. The fifth and sixth plants will feature even more advanced process technologies. TSMC emphasized, "The construction and mass production plans for the Arizona plants will be determined according to customer demand."

Taiwan Economic Daily News = Reporters Ji Jingjing and Zhong Huiling / Translation by Asia Economy

※ This column has been published as part of a strategic partnership between Asia Economy and Taiwan Economic Daily News.