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Chinese media calls TSMC’s Arizona fab a ‘dark turn’ for chip industry

Chinese nationalist tabloid Global Times has blasted the investment by Taiwan Semiconductor Manufacturing Co (TSMC) in Arizona as “a dark turn” in the global semiconductor industry, and accused Washington of tricking the world’s most advanced chip maker into setting up a wafer fab in the US.

In an editorial on Friday, the newspaper, which is affiliated with the official People’s Daily, said TSMC’s decision to invest in cutting-edge technology in the US showed that Washington had tricked it, and that the US was stealing from the world’s most important technology in “our Taiwan region” – a reference to Beijing’s claim of sovereignty over the self-ruled island.

The Chinese government has remained silent over the new TSMC plant in Arizona, but Beijing has repeatedly voiced opposition to Washington’s restrictions on China’s chip industry. Due to restrictions from Taipei and Washington, TSMC is not allowed to invest in advanced chip capacity on the Chinese mainland. The company’s factory in Nanjing, the capital of China’s eastern Jiangsu province, only produces mature node chips.

In contrast, TSMC’s investment in Arizona, including a 3-nanometre wafer foundry and an upgraded 4-nm fab, will be engaged in advanced chip production. The Taiwan foundry plans to triple its original investment in the US state to US$40 billion from US$12 billion. In a ceremony this week to mark the first installation of equipment in the Arizona fab, US president Joe Biden declared that “American manufacturing is back”.

TSMC’s US$40 billion commitment, the largest foreign direct investment in Arizona’s history, came four months after Biden signed the US Chips and Science Act, which earmarked US$53 billion in subsidies for domestic chip manufacturing projects and local semiconductor research and development.

The Global Times reprimanded the US and Taiwan’s ruling Democratic Progressive Party for “hollowing out” Taiwan.

“We must ring the alarm bell louder … the US may pressure chip makers in other countries as it did to TSMC,” the editorial reads. The US is like a bull in a China shop, smashing market rules into pieces, it added.

Outside China, most of the concerns about TSMC’s investment related to economics, and whether the company can operate the Arizona fab profitably given higher costs in the US compared with Taiwan. TSMC’s Taipei-listed shares have shed 2.03 per cent in value this week, trading at NT$481.50 (US$15.70) at the close on Friday.

The US Chips Act is part of broader American efforts to maintain and even extend US technology leadership amid a tech war with China that is centred around semiconductors and artificial intelligence.

The US government has granted subsidies to many industries in the past, including oil, agriculture, housing, farm exports, automobiles, and healthcare. However, some analysts and economists are opposed to the chip subsidies, believing they are a waste of taxpayer’s money and may do more harm than good in the long run.

Analysts said the decision by TSMC to invest in 3-nm production in the US was driven by geopolitical considerations.

TSMC’s announcement “means that geopolitical factors have permeated the semiconductor industry” said Arisa Liu, a senior semiconductor research fellow at the Taiwan Institute of Economic Research.

“There were political factors behind TSMC’s decision, and coupled with the tense military atmosphere across the Taiwan Strait, it made TSMC consider diversifying to reduce the risk of having its production base [in Taiwan],” Liu added.

At the official ceremony this week, TSMC chairman Mark Liu said the Arizona plant would “produce the most advanced semiconductor process technology in the country, enabling next generation high-performance and low-power computing products for years to come”.

Also at the ceremony, TSMC founder Morris Chang – who has previously said chip making costs in the US were 50 per cent higher than in Taiwan – was quoted by media as saying globalisation and free trade were “almost dead”.

The US has been courting its allies including Taiwan, Japan and South Korea to form the Chip4 Alliance, a move Beijing sees as an attempt to marginalise China’s role in global supply chains. Washington has also upped its pressure on the Dutch government to restrict China-bound shipments of lithography systems from ASML.

Shanghai-based IC consulting firm ICWise said the TSMC Arizona fab would remedy the only weakness in America’s already strong semiconductor value chain, and set an example for others to follow.

The 4-nm and 3-nm Arizona foundries are slated to become operational in 2024 and in 2026 respectively, and together will have a capacity for 600,000 wafers per year, generating US$40 billion in annual revenue, according to a TSMC statement.

US tech firms Apple, AMD and Nvidia are expected to be the first customers for the TSMC Arizona fabs. However, despite all the focus on advanced 3-nm production, legacy nodes such as the 28-nm process that China is capable of producing, are considered growth markets in the overall global chip industry, which is expected to see a 3.6 per cent drop in revenue next year due to inflation and weakness in consumer electronics.

“In reality, the only chips made on [the 3-nm] process next year will be iPhone processors, and maybe some other smartphone chips,” said Abhinav Davuluri, technology equity strategist at financial services firm Morningstar. “The automotive and industrial chips that were in short supply over the last couple of years are typically made on much more mature and legacy processes.” South China Morning Post

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