U.S. ramps up chip production efforts with taxpayers footing part of the bill - Is it worth it?
- Thread starter soAsian
- Start date
It remains to be seen if TSMC's 5-4nm factory, which will only operate in a couple of years, will have much clientele. Especially when the chip prices will be much higher than for chips made in Taiwan. Everything is more expensive in the US including salaries.
Previous experience with TSMC's WaferTech subsidiary and Samsung's Austin fab has not been exactly positive for either company.
Intel's EUV expansion was highly necessary and should have happened sooner. Because Intel is an IDM they can better absorb the additional foundry costs than a pure play foundry like TSMC.
Previous experience with TSMC's WaferTech subsidiary and Samsung's Austin fab has not been exactly positive for either company.
Intel's EUV expansion was highly necessary and should have happened sooner. Because Intel is an IDM they can better absorb the additional foundry costs than a pure play foundry like TSMC.
Chip prices will not be higher. Manufacturing costs might me higher but wafer prices will be the same as Taiwan fabs. You also have to factor in the CHIPs Act monies for AZ. TSMC is NOT losing money on the AZ fabs.
TSMC AZ fab begins production this year. Your view of TSMC seems jaded, why is that?
Conclusion: making chip in the US is very expensive. more money is needed because National security.
Intel's Pat is trying hard to sell foundry services to Elon and Altman
That is a ridiculous video and your conclusion is wrong. Ridiculous.
Listening to these CBS, ABC, NBC etc. non-semi news people talking about semi is just so painful. I almost fainted, lol. Can't finish watching the video, had to stop after just a minute.
"yellow lights protects the millions of chips...", "... before officially they are a semiconductor"... hahahahaha.
My only conclusion is they should stop doing stories like these.
"yellow lights protects the millions of chips...", "... before officially they are a semiconductor"... hahahahaha.
My only conclusion is they should stop doing stories like these.
This is not the impression I got from speeches by the TSMC CEO last year. I hope you are right.
China, Taiwan, Japan, South Korea, and Singapore also subsidize factories. And they pay lower salaries to workers while making them work longer hours.
In China, for example, you get the land for free. You pay 0% corporate tax. And if you do a joint venture with the Chinese government they might pay the cost of half or more of your factory. You will get money from both the local and central government.
In other countries in the Far East the subsidies vary but are also quite extensive.
For example the Japanese government subsidized 40% of the cost of the latest TSMC fab there.
They definitively won't be making any revenue until they start operating them and delivering product.
I am just assuming it will take them time to ramp up production.
Based on what?
The TSMC Symposium was last week so maybe your information is outdated.
There is a lot of semiconductor experience in these forums. You might do better to ask questions than make assumptions.
MKWVentures
Moderator
Is it worth it? YES
It is not just for national security. Semiconductor Fabs are amazing economy boosts, high paying job boosts and the impact lasts a long time. It is the best thing you can do for the people in the US. Having Global, Intel, TSMC, Samsung, Micron all getting money will have a measurable impact on the whole nation. It is the best use of money by the government in 50 years. (now the rest of the 200B slush fund might get wasted we wont know where it went). But the Fabs subsidies will be game changing. It will pay for itself.
AND ALL other countries give subsidies to these companies because is SO smart to do so. The difference is where the fabs are built.
They should hire me to do PR LOL
It is not just for national security. Semiconductor Fabs are amazing economy boosts, high paying job boosts and the impact lasts a long time. It is the best thing you can do for the people in the US. Having Global, Intel, TSMC, Samsung, Micron all getting money will have a measurable impact on the whole nation. It is the best use of money by the government in 50 years. (now the rest of the 200B slush fund might get wasted we wont know where it went). But the Fabs subsidies will be game changing. It will pay for itself.
AND ALL other countries give subsidies to these companies because is SO smart to do so. The difference is where the fabs are built.
They should hire me to do PR LOL
It is definitively worth it so we do not regress a decade just because there is a war in Taiwan or something. Putting all your eggs in one basket is never a good idea.
Yet according to Rock's Law factories increase in price exponentially. Which means the amount of companies and fabs making the leading edge process will keep decreasing. From dozens of companies we are now reduced to TSMC and Samsung at the leading edge (soon Intel as well).
In the long term will be impossible to have multiple sites without subsidies. You could say this is already the case.
Yet according to Rock's Law factories increase in price exponentially. Which means the amount of companies and fabs making the leading edge process will keep decreasing. From dozens of companies we are now reduced to TSMC and Samsung at the leading edge (soon Intel as well).
In the long term will be impossible to have multiple sites without subsidies. You could say this is already the case.
If you look at the Federal budget/deficit, in comparison I think the CHIPs Act is money well spent. Hopefully there will be more to come.
By the way, I was working in Silicon Valley when we had fabs here. They were dirty and the EPA tossed them overseas so it wasn't all about cost. I was also in Hsinchu in the 1990s. You could taste the air back then.
"Much higher" this analysis based on what?
If its political.opinion maybe best wait and see
Are you in Singapore to make this comment with respect to working hours.
Nobody makes anyone do anything here I assure you despite the opinion of Singapore is run from oitside the country
MKWVentures
Moderator
Luckily Semi fabs are much better for air quality today than 90% of industries. I have heard stories about Intel fab 1,3,4 that are wild .... those days are over..
The Intel Ocotillo site air quality is 100 times better since Intel built and expanded fabs there (It was intolerable before Intel got there .... IYKYK LOL)
tooLongInEDA
Moderator
OK, but what's the limit on what the subsidy should be then ?
Let's keep things simple and assume govt X is subsidising a fixed percentage of company Y's leading edge (let's call it around 3nm) logic wafer fab and no ongoing handouts. What's the rough % estimate where the subsidies outweigh the benefits ? 20% ? 50% ? 80% ?
I'd like to understand a bit better where the crossover might be.
I'm also curious why governments don't want an equity stake when they're putting up this sort of cash.
I'm also a little sceptical when I recall that sometime during the early/mid 1990s the UK government was so persuaded by this argument that it ended up with Wales in a bidding war with the North East of England (UK bidding against the UK) for a memory wafer fab that either never got built or shut after a year or two. Memory being memory and the fab being planned/built at the peak of the market just before the next bust. Still, I'm sure LG were grateful.
Interesting question. What is TSMC worth to Taiwan, given the probable reality of the "silicon shield"? Trillions of dollars? What are advanced chips worth to China, in light of the US technology embargoes? Pretty much any amount I'd guess.
What are fabs worth to US pride and jobs? Counting federal, state, and local subsidies, many tens of billions of dollars. I agree with @MKWVentures, there is a legitimate national security factor that is worth a lot.
In the case of the US, the US government can and has held equity stakes in companies. Politically it's not popular, and seldom done. It was discussed when the CHIPS Act was being written, but obviously Congress wrote in a very clumsy profit-sharing plan instead (which IMO is a profoundly dumb idea). An equity stake implies the government is going to invest for profits, which is frowned on, or a social agenda, which is not in keeping with the US free enterprise agenda. Also, in the US there is resistance to government control over private corporations, so board seats or special reporting structures are usually out of the question.
Other countries do own equities, obviously, but usually in sovereign wealth funds. Like the world's biggest, Norway's. (It is fascinating to think Norway, a nation of 5.5 million, has a sovereign wealth fund of $1.4T) I'm not aware of any of these funds being activist investors either.
The US has its share of fiascos too. The planned Foxconn electric car plant in Lordstown, Ohio comes to mind as an example in the fiasco category.
MKWVentures
Moderator
I have worked on these agreement details in the past. they have standard requirements.
1) Limit on % subsidy is what ever is negotiated. 25-45% of Capex is typical for most countries. There is no limit. If you do 60%, every company on earth will build in your state. Companies have financial models and balance all the costs. In other less capex intensive, 100% subsidy of Capex would make sense (we buy the building for your call center)
2) Other terms could include government equity.... but that is not a subisidy, thats an investment. The US has few areas where that is done. In other countries it happens and the government owns 30% of the company.
3) The UK was a disaster. You need to have clauses to protect the government. In other countries, there are clauses that say the government takes control (nationalizes) the facility if the metrics on hiring and building are not met. In the US typically there is a fine (which may or may not be enforced). It should be sufficiently painful to fully reimburse the government.... but it is a negotiation. The UK plan was a poor one IMO.
4) A simplified contract says: we pay 30% of all capex. show us receipts, get a check . no prepayments. you must have payroll of 3000 people, 80% must be local hires. 10M fine per month if you fail this. We pay for highways and traffic. you pay for all driveways and connecting road to highway. Failure to spend 10B and hire 3000 people in the next 5 years is default, Fine of 125% of subsidy. In Other countries, government takes property on default.... everything is renegotiated based on these penalties.
Again, if you don't want manufacturing in your country, thats fine.... dont pay the subsidy.
I can give examples on how these deals are decided and work and why subsidies are required and why they are SO good for the government. I can also tell about bad ones and why the government got cheated and how it could have been prevented
Here’s how not to do it - stupid politics just to claim a photo-op. By the time the clowns who put this deal together were out of office, the state and local governments had spent $1B to create a few jobs inside essentially empty buildings doing nothing. The successors were left to pick up the pieces based on a loophole-filled contract.
Wisconsin Foxconn Deal Cost Taxpayers Millions—And It Will Continue To Cost More Millions
In exchange for a $3 billion dollar subsidy, the company Foxconn promised to build a $10 billion factory that would create 13,000 jobs in Wisconsin. That promise still hasn’t come to pass, and there’s no evidence that it ever will.
www.strongtowns.org
MKWVentures
Moderator
agreed. But actually a lot of this issue had nothing to do with incentive subsidies. Building infrastructure and timing is always a hard part of any development. and every public work project is a study in inefficiency and cronyism.Here’s how not to do it - stupid politics just to claim a photo-op. By the time the clowns who put this deal together were out of office, the state and local governments had spent $1B to create a few jobs inside essentially empty buildings doing nothing. The successors were left to pick up the pieces based on a loophole-filled contract.
Wisconsin Foxconn Deal Cost Taxpayers Millions—And It Will Continue To Cost More Millions
In exchange for a $3 billion dollar subsidy, the company Foxconn promised to build a $10 billion factory that would create 13,000 jobs in Wisconsin. That promise still hasn’t come to pass, and there’s no evidence that it ever will.
If you build all the infrastructure before the plant is running, you need back up plans. A LOT of projects get delayed indefinitely. A couple places planning Fabs today will find that out in the next 5-7 years
I had made my way to South Wales by then and had an interview with LG!
Then the Financial crisis kick in and LG only opened a TV factory.
At least Newport Wafer Fab (Now under Vishay I think).is still fighting the good fight for the "Silicon Valleys"
