TSMC To Charge Up To 30% More For Chips Made In the US (tomshardware.com) 39
According to DigiTimes, TSMC will charge an extra 30% more for chips made in American than for chips made in Taiwan. Tom's Hardware reports: TSMC has started discussions with customers about orders and pricing for both overseas plants, which are set to begin commercial production in late 2024. Industry insiders believe that prices of chips produced on TSMC's N4 and N5 process technologies in the U.S. will be 20% -- 30% higher than those in Taiwan, while older process chips produced in Japan's Kumamoto facility on N28/N22 as well as N16/N12 nodes may cost 10% - 15% more than similar chips fabbed in Taiwan.
While American chip designers certainly won't appreciate higher costs on chip production in the U.S., it is likely that they will make chips aimed at government and less price-sensitive applications in Arizona. Therefore, they should be able to pass those extra costs on to their customers without risking their competitive positions. Given the high construction and operational costs of fabs in Japan and the U.S., TSMC is going to pass those extra expenses on to customers to maintain its gross margin target of 53%.
While American chip designers certainly won't appreciate higher costs on chip production in the U.S., it is likely that they will make chips aimed at government and less price-sensitive applications in Arizona. Therefore, they should be able to pass those extra costs on to their customers without risking their competitive positions. Given the high construction and operational costs of fabs in Japan and the U.S., TSMC is going to pass those extra expenses on to customers to maintain its gross margin target of 53%.
Are they paying the employees? (Score:5, Interesting)
Raising prices so you can pay your workers generously is fine.
Raising prices so you can line your own pockets is not fine. The company is currently taking water from farmers in Taiwan rather than investing in desalination with their $1 trillion in profit.
53% margin matches their history which is half of their revenue is recognized as profit.
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$1 trillion in profit
Nonsense. No company in the history of the world has made a $1T profit. If you're trying to be objective, maybe mention that you are talking about Taiwan dollars. $1 USD = $30 Taiwan dollars.
Re:Are they paying the employees? (Score:4, Informative)
Lets compare them against others in their field. I'm using someone's numbers broken down from Jan 2023. I don't vouch for their accuracy. Based on other more general numbers I see online, I doubt the truth would be too different from this. In the US (TSMC isn't a US company, but it's an available comparison) there are 63 semiconductor firms and the average gross margin for them is 54%. I'm not assigning a morality to those margins, but I am saying TSMC does not appear to be in excess compared to others.
Re:Are they paying the employees? (Score:5, Insightful)
First, gross margin does NOT mean
I read it twice and missed it twice.
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Permits and environmental regulations cut into profits. Receiving logistics for materials and outgoing shipments is much more complicated for Phoenix, AZ than it is for a location near a major port.
Re:Are they paying the employees? (Score:5, Insightful)
Permits and environmental regulations cut into profits. Receiving logistics for materials and outgoing shipments is much more complicated for Phoenix, AZ than it is for a location near a major port.
Indeed. This is as if people (most of them at least) are just now realizing that we offshored those things to other countries in the last 50 years because labor was cheaper there, laws and regulations were more lax, environmental concerns non-existent...
People and corporations are cheap, and they don't care about negative externalities [corporatef...titute.com]. Even more when those externalities have impacts ranging between 20 to 1000 years. For instance, 60% of the CO2 emitted in the atmosphere right now will still be there in 20 years. In 1000 years, it will be 30%. Most people struggle to manage their monthly budget. Sadly the human mind is not made to grasps and tackle those problems easily.
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Permits and environmental regulations cut into profits. Receiving logistics for materials and outgoing shipments is much more complicated for Phoenix, AZ than it is for a location near a major port.
Logistics in Phoenix are difficult because the area may produce food but not much else to sustain itself.
Phoenix is served by 2 major railroads, UP and BNSF. Arizona & California, a short line RR, interchanges with BNSF at Castle Rock, just NW of Phoenix, so that's 3 railroads serving Phoenix. Those major railroads will ship almost anything, including nuclear material.
Major highways do pass through Phoenix - I have driven on them.
Phoenix Sky Harbor International Airport is a very large and very busy fac
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Generally you want a port that is already receiving raw silicon, neon gas, palladium, etc. If you want to get it by train. Then ship it to the nearest port, load it on a train. Costs more money to do that of course.
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What you wrote:
Raising prices so you can line your own pockets is not fine.
What it actually meant:
Capitalism and free market is not fine.
What's next? "Communism is fine"?
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Raising prices so you can line your own pockets is not fine.
It is fine for a company to maximize its profit. That's how capitalism works.
Don't like it? Take your business elsewhere. Or, even better, open a competing fab.
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It is fine for a company to maximize its profit.
I'd say that that depends on what it is the company does or makes. It may be 'legal', but that doesn't necessarily make it 'fine'. Provision of essentials (housing, clean water, food, emergency medical care, etc.) should not, to my mind, be subject to the absolute amorality of the market, doubly so when regulatory capture & crony capitalism distort the market in favour of business owners.
That's how capitalism works.
I think you've conflated capitalism with the free market.
Don't like it? Take your business elsewhere. Or, even better, open a competing fab.
And if there's no other place to take your business to? Or y
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Raising prices so you can pay your workers generously is fine.
They aren't paying workers directly. They are paying them in terms of community support, regulations, worker health and safety, and other legal requirements.
The idea that production costs are equal in Taiwan and the USA and any difference is just profit to be paid out to employees is delusional.
There aren't any (Score:2)
They can't dump poison into wells though. e.g. no "cancer villages". That's were some of the cost is. The rest is just profit. Modern mega corps will use any excuse to raise prices. There's little or no competition so they can.
USD (Score:2)
Devalue the USD and the problem will solve itself. Production should only be done where the costs are low.
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Re:USD (Score:5, Interesting)
Slap a 30% tariff on chips imported from taiwan then. Bam, price parity.
Not really a bad idea, but not in the way you see it though.
You have to ask yourself why chips cost 30% more when manufactured in the US. Simple answer: mostly labor laws and environmental regulations... Those can also be seen as "negative production externalities" [corporatef...titute.com] too: Negative production externalities occur when the production process results in a harmful effect on unrelated third parties. For example, manufacturing plants cause noise and atmospheric pollution during the manufacturing process.
Negative externalities are often not taken into account when pricing a manufactured good. Meaning that when you buy a chip for 30% less from Taiwan, you don't take into account the pollution it was causing there, because environmental laws were more lax. You don't take into account the lower cost of labor, which makes it harder for people to live a decent live. You don't take into account the lower taxes, meaning less public services, meaning more difficult lives for the workers.
If you put a price on those externalities, and start taking them into account, you would end up with what you are proposing: a 30% tariff tax on chips imported from Taiwan. This would however require that we acknowledge that we offshored those industries for selfish reasons in the first place, because we wanted cheap things first, and we didn't want to deal with the impacts.
Interestingly enough, the EU is starting to do that by putting in place a carbon border tax [europa.eu], to push countries outside of the EU to start taking into account the negative externality known as "CO2 emissions".
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I have been saying for over a decade now that a carbon tax at the border of the EU was the way to go. One of the main ways that China is cheaper is that they are hugely wasteful with energy. Mind you the USA is not that good either. Now Japan, now we are talking about a country that uses the smallest amount of energy to manufacture goods. I wonder why :-)
It's not labor laws (Score:2)
I'm not sure I'd call it "environmental regulation" either. That sounds really "save the whales" namby-pamby. But that's not what this is about. This is about cancer villages. This about dumping toxic chemicals in ground water. This is about shit like the Bhopal disaster.
We need a phrase that describes the kind of basic community safety measures that we're really talking about. I'm not all that good at turning a phrase, can somebody else give it a crack?
That is expected (Score:5, Interesting)
After all TMSC is asked to manufacture things in less-than-optimal locations. That does increase cost. Still better to not have all eggs in the Taiwan-basket.
so wait.. they'll charge more and get subsidies? (Score:1)
So, they are asking for more subsidies to the tune of $15 Billion and forecast production costs passed to consumer to be 20-30% higher?
damn... that's a sweet deal.. for them
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damn... that's a sweet deal.. for them
The USA reaps what it sows.
(again)
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If a work-from-home employee was ordered to start working onsite in Seattle, and the worker demanded a pay increase to do it, slashdot would fall all over itself in supporting him.
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missing some critical elements in that analogy.
I go looking for a job- get hired to work in office.. the rate i agree to incorporates the cost of my time of travel and associated costs.
later-
If i am asked to work from home... the agreed to salary sticks.
If i am asking to work from home.. they can ask for a pay cut.
It depends on who is the one breaking the agreed to contract terms.
I work from home.. if my boss wanted me to come back to the office, I'd get laughed in the face if i ask for a raise to do so, an
Military spending. (Score:2)
Was the CPU chip cost ever a thing? (Score:2)
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The CPU cost is only a thing in $600 workstations
In my $600 workstation, the CPU cost $100. But that's a huge percentage of the price. But if the CPU is $4000, like a high-end EPYC, then it's just as huge a percentage of the price of a $24000 server... So it seems to me like it depends on what kind of server it is, are you compute-heavy or IO-heavy.
Cloud has proven compute cost not longer matters
What do you mean? You pay your provider more for more compute time, so it clearly still matters.
water (Score:1)
"government and less price-sensitive applications" (Score:3)
In other words, poorly spent taxpayer's money.
You're missing the big picture (Score:2)
it is only a matter of time before China attempts to reclaim control of Taiwan. All outcomes will be disastrous, even with planning.
The worst, China retakes Taiwan relatively intact, and so gains chip manufacturing parity overnight. Well, ok, a few months to restart under CCP control.
The less worst, China retakes Taiwan with great damage. Possible rebuilding to take years. Chip production disrupted worldwide. Chaos and economic impact.
Among the other outcomes, China fails on the first attempt(s), with disas
Re: thats starts ww3 so never gonna happen (Score:2)
That won't start WWIII. Sadly it's almost inevitable. The only issue I can't see as obvious is what amount of exodus/escape by the population will take place. If China attempts and assault, will there be time? If China uses blockades or isolation, then surprise will settle the issue.
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