The world’s largest manufacturer of electrical chips, The Taiwan Semiconductor Manufacturing Company (TSMC), is building a manufacturing facility in the US. This investment is expected to cost billions and greatly expand the local job market. The news is good, but comes at a cost. The price of the chips produced in this domestic facility is set to cost significantly more than their foreign-made counterparts.
The Importance of Chips
Behind every electrical switch is a chip, or semiconductor, a digital brain responsible for performing processes or memory storage. They’re present in everything from smartphones to cars to military equipment. According to the National Institute of Standards and Technology, chips are “integral to America’s economic and national security.”
The majority of design and innovation for chip technology takes place within the US. However, domestic production of semiconductors is lower than 10%. East Asia is the leading manufacturer of chips globally, producing 75% of the supply. Specifically, 90% of the most advanced chips are made in Taiwan.
TSMC is the world’s largest semiconductor company. It is based out of Hsinchu, Taiwan. The company produces electronic chips used by customers in electrical systems and technological fields. Clients include Apple (the company’s largest customer), Sony, Samsung, and many more.
Chips Made in the US
In 2020 it was announced that TSMC would build a manufacturing plant in Phoenix, Arizona. The estimated cost of building that facility has since grown considerably since its original projection of $12 billion. With that, chip costs in the US are expected to be higher. But how much higher isn’t known quite yet.
TSMC Chief Financial Officer, Wendell Huang, stated that “the major reason for the cost gap is the construction costs of building and facilities, which can be four to five times greater for a US fab versus a fab in Taiwan. Speculations report that US-made chips could be up to 30-50% more expensive than chips made in Taiwan.
The Impact on National Security
America cannot continue its dependence on overseas production of chips used to make consumer goods, let alone sensitive military equipment. It’s a matter of national security. As China relentlessly works to monopolize the global semiconductor market, America’s ability to hold its own when it comes to chips, is more important than ever.
It’s a complex web of strategy, war games, and scenario predictions. Taiwan uses its throne in the microchip industry as a defense against the dominance of either China or the United States. And it’s a very high throne. America is incredibly dependent on the Taiwanese supply of chips. This is the driver behind bringing chip production to the US.
President Biden signed the CHIPS and Science Act of 2022 into law to provide $50 billion to the field of semiconductor research and manufacturing. Among other benefits, the act is expected to boost the production of chips in the US by up to 50%. In addition to the new TSMC facility, the construction of other plants in the US is being planned as well, like Samsung in Austin, Texas.
Specific details about the higher cost of the US-made chips from TSMC are not yet released. Sources remain unofficial yet provide US clients of the company with a hint as to what to expect. Prices always tumble down a chain, so if companies are paying more for chips, consumers will end up paying more for the products they comprise. Although prices may rise, Americans cannot afford to sleep on increasing domestic chip production.