Breakingviews - TSMC’s U.S. reshoring initiative looks wafer-thin

FILE PHOTO: A logo of Taiwan Semiconductor Manufacturing Co (TSMC) is seen at its headquarters in Hsinchu, Taiwan August 31, 2018. Picture taken August 31, 2018. REUTERS/Tyrone Siu/File Photo

HONG KONG(Reuters Breakingviews) - A U.S. reshoring initiative by TSMC looks wafer-thin. The Taiwanese semiconductor maker on Friday unveiled plans to build a new factory in Arizona. It will produce a tiny fraction of what similar Asian ones do with a comparatively small workforce. It only goes to show just how hard it’ll be to move high-tech manufacturing to America.

By most measures, the new project is tiny for the world’s biggest contract chipmaker. The $250 billion company formally known as Taiwan Semiconductor Manufacturing says the plant will eventually churn out 20,000 silicon wafers per month. TSMC’s total capacity across 11 factories, eight of which are in its home market, reached 12.3 million last year.

An intended $12 billion investment, spread over nine years, represents just 8% of this year’s $16 billion capital expenditure budget. And although U.S. Commerce Secretary Wilbur Ross touted the plan as a “renaissance in American manufacturing”, the factory will create only 1,600 jobs. Some 33,000 people submitted claims for unemployment benefits in Arizona alone last week.

Moreover, by the time production starts in 2024, the facility’s so-called 5nm semiconductors may no longer be at the cutting edge. TSMC already has started construction of its next-generation factory, which is on track to manufacture faster 3nm chips by 2023.

This is nevertheless a savvy move for TSMC. It warned in its most recent annual report that relocating manufacturing to the United States was a risk that could hurt productivity and efficiency, but Chairman Mark Liu is under pressure from President Donald Trump. His administration wants the company to stop supplying Chinese telecom equipment maker Huawei, a major customer that U.S. authorities blacklisted on national security grounds. A Commerce Department official told Reuters that TSMC’s new investment will generate “good will”.

That should help ensure a better outcome than Foxconn’s debacle in Wisconsin. The iPhone assembler said in 2017 that it would invest in a $10 billion campus and hire 13,000 people in exchange for some $3 billion in incentives. The politically controversial project has been dramatically downsized. TSMC’s undertaking may stand a chance of being realised, but its modest aims tell the bigger story.


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