Taiwan Semiconductor Manufacturing Company (TSMC) is set to begin manufacturing chips from its advanced semiconductor site in the US. However, a recent report by DigiTimes suggests that the chips produced in the US will be approximately 30% more expensive than those made in Taiwan.
Higher Operational Costs in the US
TSMC is the world’s largest contract chipmaker, and it typically manufactures chips for several tech giants at its facility in Taiwan. The higher cost of operations in the US is believed to be the reason for the increased prices.
Increased Costs for Advanced Chips
According to the report, TSMC’s N4 and N5 processes, which refer to the 4nm and 5nm manufacturing processes, respectively, will be 20% to 30% more expensive in the US. This is because the new site will carry heftier operational costs. The same is expected from TSMC’s new plant in Japan, which is set up to build less advanced N28/N22 and N16/N12 process nodes. These chips will cost around 10% to 15% more than those made in Taiwan.
Maintaining Profit Margins
The report also suggests that these price hikes are necessary to maintain the company’s 53% margin rate. Essentially, TSMC needs to raise the cost to its clients to ensure its own profits. It remains to be seen how TSMC’s customers, including AMD, Qualcomm, Apple, and others, will offset the rise in the cost of their products.
Incentives for TSMC in the US
The news about the increased prices comes as TSMC eyes a $15 billion incentive in the US. It is not yet clear how the incentive will affect the prices of the chips manufactured at the new site.
Overall, while TSMC’s move to establish advanced semiconductor sites in the US and Japan is a step towards globalizing its operations, the increased costs may pose a challenge for the company and its customers.
