TSMC’s Arizona Fab 2. (Photo source: TSMC)
An analysis has revealed that TSMC, the world’s largest foundry company, faces semiconductor production costs in the United States that are more than twice as high as those in Taiwan. High labor costs and materials procurement prices are the primary causes.
SemiAnalysis, a semiconductor market analysis and consulting firm, analyzed the production costs of TSMC’s Taiwan facility and its Arizona plant in the United States. The analysis compared wafer costs between Fab 18 located in the Tainan Science Park in Taiwan and Fab 21 in Arizona, U.S.
According to SemiAnalysis, , the Taiwan facility’s total production cost per wafer based on the 5-nanometer (nm) process was $6,681, while the U.S. facility’s cost reached $16,123. Production in the United States resulted in approximately 2.4 times higher costs.
This is attributed to the significant impact of labor costs, materials procurement prices, and depreciation expenses. When manufacturing semiconductors in the United States, labor costs and materials procurement prices per wafer were approximately twice as high compared to Taiwan. Equipment depreciation also showed about a four-fold difference compared to Taiwan.
If semiconductor selling prices remain the same, the gross profit margin in the United States would inevitably be much lower. In fact, the margin per wafer reached 62% in Taiwan, while the U.S. margin was only 8%. This means that from a semiconductor manufacturer’s perspective, securing profitability when producing in the United States is challenging.
This has significant implications for Korean semiconductor manufacturers that have expanded into the United States. Samsung Electronics and SK Hynix are currently operating or constructing new semiconductor fabs in the United States. Samsung Electronics is building a fab in Taylor, Texas, while SK Hynix is constructing a fab in West Lafayette, Indiana. As U.S. production costs are expected to be higher compared to Korea as well, new strategies are required to improve profitability.
An industry insider said, “A premium strategy with different pricing policies for semiconductors produced in the United States could be a viable approach,” adding, “Since this is local U.S. production to respond to geopolitical uncertainties, it is important to maximize subsidies and other support.”
