Morris Chang on TSMC Arizona, An Exercise in Futility

[Arthur Hanson]

Morris Chang has stated the Arizona fab is an expensive exercise in futility with costs 50% higher than Taiwan. The big question is can the fabs in the US compete on cost. Will the US be able to build state of the art fabs that are cost effective is the big question. With excess staffing and construction costs, is this even a good economic decision or a loss leader to protect our supply against a Chinese invasion that I see little chance of happening for a great number of reasons, unless utter insanity prevailed across the political spectrum. Any thoughts or comments appreciated.

Why Apple Wants Chips Made in the Arizona Desert

A new wave of U.S. chip manufacturing, led by Taiwan Semiconductor, reflects a paradoxical new reality: Geopolitics are colliding with economics, and what’s good for one is pressuring the other.

www.barrons.com

 

[nghanayem]

As has been discussed ad nauseam Morris is off his rocker on how much more expensive it is. Especially during the first 5 years of the fab where tool deprecation dominates wafer costs I wouldn’t be shocked if the cost delta was far under Scotten’s off the top of my head 10% cost delta. Also Morris is retired he is not privy to TSMC’s financials.

As for war I would have said the same thing about Russia invading Ukraine. So at this point I’m hanging up my crystal ball when it comes to guessing the choices dictators would make.

In my opinion the diversification lines up with a moto I have always liked. “Plan for the worst and hope for the best”.

 

[count]

As has been discussed ad nauseam Morris is off his rocker on how much more expensive it is. Especially during the first 5 years of the fab where tool deprecation dominates wafer costs I wouldn’t be shocked if the cost delta was far under Scotten’s off the top of my head 10% cost delta. Also Morris is retired he is not privy to TSMC’s financials.

As for war I would have said the same thing about Russia invading Ukraine. So at this point I’m hanging up my crystal ball when it comes to guessing the choices dictators would make.

In my opinion the diversification lines up with a moto I have always liked. “Plan for the worst and hope for the best”.

He's not off his rocker, because tools are so expensive and depreciation is such a big component of cost, it's essential that extremely high levels of utilization are achieved and the factory is running all the time no matter what. This requires an extreme level of dedication from the engineers and workers to keep the operation running at all costs. In Asia the dedication is there, people have no issue sleeping at the factory if needed. In the US that sort of dedication is not there.

 

[Daniel Nenni]

There is a reason why Morris is no longer associated with TSMC. TSMC has changed under new management and really is a new company. Much more competitive, much more focused on customer success both inside TSMC and inside the ecosystem. TSMC is one of the best managed companies in the world. TSMC management does make mistakes but they own them, very few companies do.

Building fabs outside of Taiwan will always be more expensive. Building fabs outside of Taiwan is not about saving money. You really need to look at the big picture to understand why TSMC is building fabs around the world. Not only will it make the semiconductor supply chain stronger, the lessons learned will make TSMC stronger, absolutely.

 

[nghanayem]

He's not off his rocker, because tools are so expensive and depreciation is such a big component of cost, it's essential that extremely high levels of utilization are achieved and the factory is running all the time no matter what. This requires an extreme level of dedication from the engineers and workers to keep the operation running at all costs. In Asia the dedication is there, people have no issue sleeping at the factory if needed. In the US that sort of dedication is not there.

Maybe where your from. But everywhere else in the US people work night shifts my friend (and not just in the semi industry). If US fabs went to sleep at night Ti, and Intel would have gone bankrupt decades ago. Samsung, Micron, and GF would have closed down their US fabs years ago as well.

 

[Daniel Nenni]

Maybe where your from. But everywhere else in the US people work night shifts my friend (and not just in the semi industry). If US fabs went to sleep at night Ti, and Intel would have gone bankrupt decades ago. Samsung, Micron, and GF would have closed down their US fabs years ago as well.

I have a son that works 24hr shifts (Fireman), a son in-law who worked night shifts (mozzarella factory), and a daughter in-law that works night shifts (911 operator). It's not just semiconductors, it is part of modern life. I worked over night shifts at Jack-in-the-Box when I was in high school. That was entertaining yet horrifying to see what people eat at 2am.

 

[Arthur Hanson]

Having worked for many companies, I have found culture to be the ultimate driver of success and failure, whether small or large. Leadership is key. Having worked in the construction industry on small to multibillion technical projects including nuclear and holding three contractor's licenses, I see no chance of building the fabs being built in the time or cost frame of Taiwan. I have worked from southern California to the Seattle area to Chicago on business trips lasting as long as three months. It will be interesting to see if TSM management can do better. Auto plants for many manufacturers find Mexico builds cars at much lower costs than in the US at the same or better quality of the US.

Sadly, the firemen in the bay area city I used to live in were totally incompetent despite their six figure pay and didn't even know the basics of firefighting. This was from direct experience at my residence twice. Luckly, a female firefighter used a heat sensor gun to persuade with me that massive hole did not to chopped in my walls as had been done before and they relented. I was given a few hours of fire fighting training on chemical and wild fires including the use of oxygen equipment.

 

[count]

Maybe where your from. But everywhere else in the US people work night shifts my friend (and not just in the semi industry). If US fabs went to sleep at night Ti, and Intel would have gone bankrupt decades ago. Samsung, Micron, and GF would have closed down their US fabs years ago as well.

I don't think you understand what I mean. Maybe watch the American Factory documentary and you will see the difference in culture between the American factory and the Chinese Factory of the company that opened the American factory. There is a massive gulf when it comes to expectations, dedication to work, how efficiency people work. It is not simply a pay thing. Factories in Asia are run on almost militaristic discipline. Workers live in dormitories and their entire life is dedicated to the factory operation.

 

[Tanj]

Factories in Asia are run on almost militaristic discipline. Workers live in dormitories and their entire life is dedicated to the factory operation.

Which just gives an exploitative deal to workers, and management an excuse not to organize things better. I think that TSMC learning how to operate in other cultures will give them a jolt of innovation which will benefit Taiwan, too.

 

[Daniel Nenni]

I remember seeing barracks/apartments in South Korea for the Samsung employees. There was one for men, one for women, and one for married people. I have not been to a Foxconn factory in China but I have read and heard some very disturbing things. This was maybe ten years ago when I was over there, something about beatings and suicides. I have never seen anything like this at the TSMC fabs. It truly was a family like environment. People did work late and I remember the whole country being locked down for a typhoon and we still had meetings at TSMC. One time Morris Chang told people to leave at 6pm for family time. That didn't last long, people were eager to get their bonuses and be promoted. I can name far worse places to work here in Silicon Valley, absolutely.

 

[count]

Which just gives an exploitative deal to workers, and management an excuse not to organize things better. I think that TSMC learning how to operate in other cultures will give them a jolt of innovation which will benefit Taiwan, too.

I would personally not work under those circumstances and neither would most Americans, but ultimately that’s what American manufacturing competes with.

It may not be as bad in Taiwan, but it’s not like it is here.

Innovation/design and manufacturing are different. There is innovation in the design of manufacturing plants, but when it comes to building it and operating it to make quality parts at high rate, that’s less about innovation and more about discipline.

 

[blueone]

I don't think you understand what I mean. Maybe watch the American Factory documentary and you will see the difference in culture between the American factory and the Chinese Factory of the company that opened the American factory. There is a massive gulf when it comes to expectations, dedication to work, how efficiency people work. It is not simply a pay thing. Factories in Asia are run on almost militaristic discipline. Workers live in dormitories and their entire life is dedicated to the factory operation.

It sounds a lot like prison labor.

 

[Jert]

I don't think you understand what I mean. Maybe watch the American Factory documentary and you will see the difference in culture between the American factory and the Chinese Factory of the company that opened the American factory. There is a massive gulf when it comes to expectations, dedication to work, how efficiency people work. It is not simply a pay thing. Factories in Asia are run on almost militaristic discipline. Workers live in dormitories and their entire life is dedicated to the factory operation.

Respectfully but strongly disagree.

I think the notion that Americans are lazy and crazy is a myth. It's not true. This is a immigrant country. Generation after generation, we come here to work hard to improve our lives, not to come to be lazy.

Come to Silicon Valley and visit our offices or labs, you will see significant number of people still there after 8 or 9 or 10pm, even in established tech giants. And it is nothing unusual for many of us still on conference calls with Asia at 10 or 11pm, from home.

The so-called "militaristic discipline", "dedication" (actually I was one of those engineers back in the days) is nothing to be too proud of. The iPhone factory workers in China, living in "dormitory" and enjoying company "benefits" is purely modern day slavery and should not be allowed in today's world, let alone to be praised as "work culture". They are not "dedicating" their entire life, they are selling their lives and souls because of economic pressure (look at the housing prices in Taiwan and China, how could they not work 24 hours a day to pay for it?)

Admittedly many of us may disagree with some of the unions or their tactics (me included). But to conclude because of that Americans are lazy, is simply untrue and not right.

 

[Barnsley]

I don't think you understand what I mean. Maybe watch the American Factory documentary and you will see the difference in culture between the American factory and the Chinese Factory of the company that opened the American factory. There is a massive gulf when it comes to expectations, dedication to work, how efficiency people work. It is not simply a pay thing. Factories in Asia are run on almost militaristic discipline. Workers live in dormitories and their entire life is dedicated to the factory operation.

The entire construction industry in Singapore is based on dormitory living , and those who run the dorms are now complaining that the Govt is bringing in increased basic living standards.

Its not about dedication , its about exploitation of those with little choice.

Nothing to be proud of paying pittance wages to workers.

 

[Barnsley]

Respectfully but strongly disagree.

I think the notion that Americans are lazy and crazy is a myth. It's not true. This is a immigrant country. Generation after generation, we come here to work hard to improve our lives, not to come to be lazy.

Come to Silicon Valley and visit our offices or labs, you will see significant number of people still there after 8 or 9 or 10pm, even in established tech giants. And it is nothing unusual for many of us still on conference calls with Asia at 10 or 11pm, from home.

The so-called "militaristic discipline", "dedication" (actually I was one of those engineers back in the days) is nothing to be too proud of. The iPhone factory workers in China, living in "dormitory" and enjoying company "benefits" is purely modern day slavery and should not be allowed in today's world, let alone to be praised as "work culture". They are not "dedicating" their entire life, they are selling their lives and souls because of economic pressure (look at the housing prices in Taiwan and China, how could they not work 24 hours a day to pay for it?)

Admittedly many of us may disagree with some of the unions or their tactics (me included). But to conclude because of that Americans are lazy, is simply untrue and not right.

Everyone love bashing "the west" for having lazy workers. Its usually those who dont have to work in the conditions people being asked to , or they have some financial stake in a company and would prefer it if the workers would work for peanuts with zero protections.

 

[count]

I don’t think Americans are lazy, and never said I did. But they are not as disciplined and hard working as workers in most Asian countries. A lot of this comes down to the better options and better pay Americans have in other industries.

If your only options are work hard in a factory or work even harder in a field, then you would be happy to work hard in a factory. To some extent, yes it can be seen as exploitation. But ultimately that's what US manufacturing is competing against.

 

[Tanj]

But ultimately that's what US manufacturing is competing against.

If we bring it back to semis, not so much. A competitive chips industry anywhere wanting to compete in the coming decades will be a highly automated factory hiring from well educated workers and well run because of understanding, insights, analytics, and automation. An argument was put up that repaying capital depends on consistent operations 24x7, which is true, but is not achieved by intense labor. We have had lights out factories in high tech for decades. Sure, some key people will be on pagers and some events will bring long hours for a team. But that is not the same as living for the company in dorms, and it is a work practice widely and successfully used in the USA.

I very much doubt that TSMC needs the "better than the fields" work force to operate its latest fabs, either.

 

[Daniel Nenni]

TSMC's Morris Chang says tougher competition in store for chipmaker

Founder adds Japan and Singapore are well-positioned to win as industry evolves

asia.nikkei.com