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Inflation Drives Up Fab Costs for Intel and Samsung by Billions of Dollars

Daniel Nenni

Admin
Staff member
intel_fab42_678_678x452.jpg


To address future demand for semiconductors amid severe chip shortages of 2020 – 2022, all leading chipmakers announced plans to build new fabs and even disclosed their estimated costs. But spiraled inflation, caused by the disruption of supply chains by the pandemic and then by the Russian war against Ukraine, increased costs of fabs for Intel and Samsung by billions of dollars, according to reports.

When Intel announced plans to establish a new manufacturing site near Magdeburg, Germany, last year, it said that its first production fab and supporting facilities would require investments of $18.7 billion (€17 billion) and negotiated $7.2 billion of state aid. But because of high inflation, increasing costs of materials, and high energy prices, the company now believes that the initial investment would be around $31.675 billion (€30 billion). According to a Bloomberg report last week, it would need $4.223 billion – $5.279 billion (€4 billion – €5 billion) more state support.

Intel confirmed that it was re-negotiating the support package with the German authorities because of increased fab costs, but they did not confirm the exact sums it sought.

"Disruptions in the global economy have resulted in increased costs, from construction materials to energy," a statement by Intel reads. "We appreciate the constructive dialogue with the federal government to address the cost gap with building in other locations and make this project globally competitive."

When completed later this decade, Intel's fab in Germany will be one of the most advanced semiconductor facilities in the world. Given the timeframe for starting production, it will likely use sub 1.8nm (post Intel 18A) fabrication processes to make chips for Intel and its customers of its Intel Foundry Service division.

Intel is not the only company to suffer from higher-than-expected fab costs. As it turns out, Samsung estimates that its initial investments in its upcoming fab near Taylor, Texas, will total over $25 billion, up more than $8 billion from initial forecasts, according to a Reuters report that cites three people with knowledge of the matter.

While wafer fab equipment accounts for the lion's share of fab costs and these tools are gradually getting more expensive, construction cost was the main reason the Taylor, Texas, fab got more expensive. Meanwhile, Samsung wants to build the fab sooner rather than later since it expects further cost increases.

"The higher construction cost is about 80% of the cost increase," one of Reuters's sources is reported to have said. "The materials have gotten more expensive," the source added.

Samsung is looking forward to completing the construction of its fab in Taylor, Texas, in late 2023 or early 2024. After it moves into the production tools, it will start making chips at the production facility in 2024 – 2025, presumably using its 3nm and 4nm-class process technologies.

 
IMHO I would be cautious about taking these comments from company as reported. Material and cost are way up, absolutely. But the reason for Germany delay and Intel wanting more money is not just cost. I would worry about whether the current Fab 52/62 gets completed, then if Ohio gets started before worrying about Germany. In the Samsung case, the new fab will not necessarily cost 25B and the "construction costs" did not increase 80% of 8B unless you are including semi tools as "materials". When semi companies make these announcements, I always say to them "you know we track spending and cash flow, right?"

a rule of thumb is [Internally forecast spending on fab < actual spending on fab < PR announced spending on fab ] . This happens for all the obvious, non-scientific reasons you would think
 
MKW may scoff, but consider this scenario:
By 2025 3M will cease all production of PFA, one of the PFAS materials which is now being restricted worldwide.
This leaves just Chemours in the USA, Solvay in Europe and Daikin in Japan as going concerns in the PFA business. 3M was/is about 20% of the market.

PFA is the maximally corrosion resistant thermoplastic resin material. Corrosive substances are used in every tool in the fab, a manageable fact of life, as long as you have PFA pipes, tubes, fittings, and linings. The internal circulatory systems of corrosive substances in a fab are closely guarded, suffice it to say, there's a lot. Without PFA, products of corrosion would get on the wafer, reducing yields or reliability. Corrosion would also likely harm people. PFA is thus one key material to fab construction.

PFA is currently produced in a way that requires a persistent and mobile (PM) toxic substance, GenX. GenX is in the Cape Fear river downstream of Fayetteville, NC, where Chemours produces PFA. There is a lawsuit. Not only can Chemours not expand production, they may lose (or in reality already lost) the "social right to operate", in as much as North Carolinians don't appreciate toxic water. PMs are a new and particularly diabolical category of toxic substance. It doesn't kill you straight away, but builds up in your blood, masking cancers from your immune system, so you can't fight off cancers. Until relatively recently, PMs couldn't be measured, 70ppt is a lot. EPA hasn't regulated it, yet.

Fabs role in all of this has been kept out of sight. The PFA shortage in 2023 is dire. By 2025, it will be untenable. PFA cost rises are a big chunk of the Taylor $8B increase, I would estimate. PFA production increases PFAS in the environment, in the Cape Fear river. Yet production increases are urgently, urgently needed.

The likely resolution to this dilemma will be filtration, but it isn't clear whether Chemours or Fayetteville will own the cost. There is no regulation requiring Chemours remove the PFAS. Most likely, PFA will become more expensive, incorporating the cost of the activated charcoal needed to remove GenX. Then Chemours can expand production and end this crisis.
 
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A very well thought out post on one microscopic issue that can have a large impact on fab costs. I always assumed the Taylor fab costs being so high was the aggressive construction/equipment fill out timeline, and then speeding that up even further. But for sure the search for more sustainable chems and materials will drive up costs in the short term as well as shortages of products that are getting their production phased out. Combine this with the tight labor market and rising commodity costs, and you’ve got quite the expensive cocktail.
 
Please expand your equation to include pork barreling, open-loop printing presses, monopolies, old neglected infrastructure, ...
 
Too much debt, too much much money, and yet there’s a lithium shortage, a PFA shortage, a worker shortage, a housing shortage, it’s an everything shortage.

Debt crowds out investment.
 
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