Producing wafers at TSMC Arizona is only 10% more expensive than in Taiwan: TechInsights
It is equipment, not labor that defines chipmaking costs.
Comments made by TSMC founder Morris Chang about high fab building costs in Arizona and higher operating costs in the U.S. created the impression that producing chips in America is way too expensive to be financially viable. However, analysts from TechInsights believe that this is not the case. According to the firm's recent study, the costs of wafers at TSMC's Fab 21 near Phoenix, Arizona, are only about 10% higher than those of similar wafers processed in Taiwan.
"It costs TSMC less than 10% more to process a 300mm wafer in Arizona than the same wafer made in Taiwan," wrote G. Dan Hutcheson from TechInsights.
While it definitely costs more to build a fab in the U.S. than in Taiwan, TSMC's cost was significantly higher because it built its first overseas fab in decades at a brand-new site with a new, sometimes unskilled workforce, according to Hutcheson. According to other people familiar with the fab-building process, it does not cost twice as much to build a fab in the USA than in Taiwan.
The dominant factor of semiconductor production cost is the cost of equipment, which contributes well over two-thirds of overall wafer expenses. Tools made by leading companies like ASML, Applied Materials, KLA, Lam Research, or Tokyo Electron cost the same amount of money in Taiwan and the U.S.; they effectively neutralize location-based cost differences.
A major source of confusion about wafer prices comes from labor costs. Wages in the U.S. are roughly triple those in Taiwan, which many mistakenly take as a significant factor in chip production. However, with the advanced automation of today's wafer fabrication facilities, labor accounts for less than 2% of the total cost, according to TechInsights's wafer cost model. Based on this model, the overall expense gap between operating costs of a fab in Arizona and Taiwan is minimal despite big differences in salaries and other local costs.
It should be noted that wafers that TSMC currently produces at Fab 21 travel back to Taiwan to get diced, tested, and packaged. Some of them then go to China or elsewhere to be put into actual devices; some will travel back to the U.S., though. Therefore, their logistics are somewhat more complicated than those of typical wafers processed in Taiwan. However, this hardly dramatically adds to costs, and TSMC now plans to build packaging capacity in the U.S. Nonetheless, TSMC is rumored to charge a 30% premium for chips made in the U.S.
Get Tom's Hardware's best news and in-depth reviews, straight to your inbox.
Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.
-
Notton Sure, the chip may only cost 10% more, but it still has to be packaged/bonded to a substrate, and that part of the process isn't up and running yet in AZ.Reply -
Marlin1975 "Only"?Reply
10% is a pretty big number. Many business's run on less than 10% profit margins. -
phead128 It's still shipped back to Asia to be packaged. This is why TSMC Arizona represents a small fraction of total capacity.Reply -
ManDaddio With as many chips as tsmc sells I really don't understand why they keep talking about how much it cost to build fabs. They make billions of dollars in profit. Everything should be paid off within a couple years.Reply
Sure I understand the cost of running the place is constant but still.
Give me a break. -
ManDaddio Reply
Tsmc is not just any other business. 10% is nothing for them.Marlin1975 said:"Only"?
10% is a pretty big number. Many business's run on less than 10% profit margins. -
isofilm Why should we trust your analysts, over the foundry's numbers, I'm SURE you analysts have included EVERY expense in their analysis.Reply -
urdrwho10 Reply
Is this 10% the total manufacturing cost or just a portion?Admin said:Despite comments suggesting high costs in the U.S., analysts found that producing chips at TSMC's Arizona fab costs less than 10% more than in Taiwan.
Producing wafers at TSMC Arizona is only 10% more expensive than in Taiwan: TechInsights : Read more
Direct materials+ direct labor+ overhead costs -
DS426 The analysts noted "less than 10%", so how much are we talking actually? 1% is less than 10%.Reply
TSMC doesn't have a cost problem -- it has a production capacity problem on their most advanced nodes.
Final numbers today probably are over 10% though as not all of the packaging can be done in the U.S. at this time, as others have noted. -
rluker5 It is notable that labor is less than 2% of the cost in this case. This is clearly on the low side for manufacturing, but there are a lot of industries that have relatively high (material+equipment)/labor cost ratios.Reply
Some seem to miss this.