If the company you created has achieved a global monopoly over one of the most critical elements of the world’s most advanced technology, you are probably going to be none too pleased if the world’s richest country decides that it wants to muscle in and take control of the situation.
So it has been hardly surprising that Morris Chang, who founded Taiwan Semiconductor Manufacturing Corp (TSMC) in 1987, is unenthusiastic about America’s plan to re-establish advanced semiconductor manufacturing on its own soil.
Having retired from TSMC in 2019, Chang first signalled his aversion to the idea at a tech forum in Taipei last October. He spoke out again in April as a guest on the Brookings Institution’s Vying for Talent Podcast.
“Can semiconductor manufacturing return to the US?” the podcast asked. Yes, replied Morris, although he thought the plan was an awful one. Describing the American onshoring effort “as a very expensive exercise in futility”, he warned that the US fabs will be “non-competitive in a world where you compete with factories like TSMC”.
The US share of semiconductor manufacturing has shrunk from 37% at the beginning of the 1990s to 12% today, according to Semiconductor Industry Alliance (SIA) figures. And it’s much worse for market share at the most advanced end of the manufacturing spectrum: producing logic chips using process nodes below 10-nanometres. Here Taiwan, or more specifically TSMC, has 92% of the market. American producers boast precisely zero, after Intel fell behind in migrating to the most advanced production nodes in 2018. The only other global player that has kept pace with TSMC is South Korea’s Samsung Electronics.
The main reason why relates to costs. Building a state-of-the-art fab, or foundry as they are otherwise known, costs about $20 billion. That’s almost three times more than a nuclear power plant and nearly twice as much as an aircraft carrier. The number of manufacturers at the advanced end of the sector has consequently shrunk to just two, although China’s SMIC has spent years trying (and failing) to join them.
Chang thinks that the American government’s plan to incentivise onshoring of advanced production through the $52 billion CHIPS Act will fall short. “Right now you’re talking about spending only tens of billions of dollars of subsidies,” he noted. “Well, it’s not going to be enough.”
According to Chang, TSMC was “very naïve” when it first established a US fab in Oregon back in 1997. It never expanded the plant as initially planned after the company realised that production costs were likely to be about 50% more than in Taiwan.
Staff salaries were one reason and another was a dearth of local talent, with fewer students opting for engineering in favour of more lucrative careers on Wall Street. Others migrated towards the design end of the chip spectrum, which the US still dominates.
Asked if he understood Washington’s geopolitical instincts for securing more of a semiconductor supply chain on home soil, Chang responded: “Frankly if there is a war in the Taiwan Strait, then I think the US will have more than chips to worry about.”
But he also acknowledged that the days when TSMC bridged the political divide in serving both US and Chinese clients were long gone. “I just hope they don’t get any worse,” he concluded of the current tensions between the two countries.
Podcast co-host Jude Blanchette looked back at Chang’s career for a demonstration of what it might take to create a successful newcomer in the sector. The China chair at the Center for Strategic and International Studies highlighted an “iron triangle” of education (Chang himself went to Harvard and MIT), an enterprising private sector and a government that prioritises the development of new technologies, as the Taiwanese did in the 1980s.
Does the US have what it takes to follow the same path? In early 2021 Intel revealed a blueprint to regain its manufacturing edge through an IDM 2.0 Strategy (Integrated Device Manufacturing). This year it announced plans, with support from government subsidies, to spend up to $100 million building a mega-fab in Ohio. US President Joe Biden described it as one of the biggest manufacturing investments in American history.
The first fab is scheduled to begin production of 5nm chips by 2024. TSMC is also building an advanced fab in the US at Washington’s behest.
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