TSMC expects customers to pay more for chips fabbed overseas

https://www.theregister.com/2024/04/18/tsmc_overseas_costs/

by rntn • 2 years ago

24 67 2 years ago

TSMC expects to survive as a corporation by diversifying the locations of their manufacturing. The cost of a product against amortization cost of new facilities will be higher no doubt. But the ability to source similar cost automation and resources is likely the same.

Although China has never made a full-blown attempt to seize Taiwan and dismantle its rival once and for all, fears of a Chinese invasion have increased in recent years, especially since Taiwan became an extremely important strategic asset thanks to TSMC's cutting-edge fabs.

Taiwan inevitably falls. Diversification out of taiwan and divestment of china toward smic will make taiwan's value to defend ever decreasing. China's analysts are looking at the cost-benefit and evaluating whether or not the world ultimately defends Taiwan or gives it up. November will be a big decider on this. https://asia.nikkei.com/Politics/U.S.-elections-2024/Would-a...

China is suddenly wanting Trump to win, lets be realistic.

mytailorisrich6• 2 years ago

TSMC, as a business, has nothing to fear from a mainland takeover beyond the risk of losing some overseas customers. It would be in the mainland's interest to keep TSMC running as smoothly as possible, like they did in HK.

Diversifying outside of Taiwan is for the benefit of the US and allies. As you mention, for Taiwan this is a bad strategic move but they have no choice but to comply.

What matters a great deal more is India, Australia, Japan, and SK

China has no military interest in any of those. Taiwan is Chinese territory.

At most China might be interested in the part of historical Tibet that is now in India (and which it still claims) but realistically a war is no longer viable or realistic.

dev1ycan2• 2 years ago

China won't do anything drastic to Taiwan/TSMC in fact they will prob keep their elections going just like with HK.

The thing however is TSMC will suffer because once the US recognizes it as Chinese controlled territory, TSMC will be unable to buy EUV machines so their production will basically freeze at its current spot

zenapollo• 2 years ago

nothing to fear

Except any executive or employee not willing to bend the knee and gargle will be fired or perhaps a re-education retreat.

bell-cot• 2 years ago

It would be in the mainland's interest to keep TSMC running...

It would also be in the mainland's interests to not be engaging in a massive military build-up. Similar for quite a few major policies and behaviors which they've been indulging in for years now.

Perhaps the CCP is not a rational actor, at least as we might prefer to account such things?

Detrytus• 2 years ago

Taiwan is Chinese territory.

Historically, it would be more accurate to say that China is Taiwanese territory ;)

It would be in the mainland's interest to keep TSMC running as smoothly as possible, like they did in HK.

Well, maybe, but they surely would redirect the output to China instead of selling it worldwide. Which is why the US would rather nuke the TSMC factories themselves than let them fall into Chinese hands. So, no matter who wins a military conflict for Taiwan TSMC most likely gets nuked by the losing side.

rhelz3• 2 years ago

If there ever were a war between China and Taiwan, I think how cheap our chips are would be one of the least of our worries. If the U.S. got dragged into it, nobody would be worried about chip prices for the next ten thousand years.

Diversifying the fab locations has no profit or business motivation. Seems to me the only reason we are doing it is to make it "less risky" to start a trade war.

The problem is a trade war will never be "less risky" for any country than the kind of nice, harmonious, trade we've had with China for the past 25 years. Its kept U.S. inflation low, enabled massive technological and manufacturing advances, and has lifted hundreds of millions of people into the middle class.

Its one of the best things that's ever happened in history. Why are we so eager to throw all that away?

Frankly, instead of making it easier for everybody to pick a fight with each other, it would be better if we just remember the fact that we actually are friends.

I love being able to design a circuit board, hit a button and have it manufactured in China and delivered to my front door in 5 days for $25. Let's just all go back to making money hand over fist, what say?

adrian_b2• 2 years ago

Taiwan is Chinese territory.

Taiwan can be a Chinese territory only according to the law "might is right".

For millenia, Taiwan has not been a Chinese territory.

Only during the last few centuries there has been a massive migration of Fujian Chinese into Taiwan that has altered its population.

Then after WWII Taiwan has been invaded by the Kuomintang, which has altered again the population of the island, so that now the non-Chinese native inhabitants have remained just a small minority.

Taiwan has been officially a territory belonging to mainland China only between 1683 and 1895, which is a rather weak basis for claiming that Taiwan is a Chinese territory, not much better than claiming that Alaska is a Russian territory.

swatcoder2• 2 years ago

If china has simply said no to war and put a stop to the ukraine war, china wouldbe doing so much better today.

This has it backwards. Assuming China envisions a strong sphere of influence over Southeast Asia and the Western Pacific, which is a vision in conflict with the US sphere of influence over that region, their ability to manifest that vision directly benefit from conflicts that draw down US readiness.

How far they get to exploit that conflict depends on other factors, including who presides over the next US administration, but in respect to this long-term vision they're in a better position for there being a war in Ukraine than not and so are invested in making it longer and more treacherous for Europe. And you see exactly that in their interactions with Russia.

deviantbit4• 2 years ago

"China is suddenly wanting Trump to win, lets be realistic."

China is telling people Trump will abandon Taiwan, and you believed their propaganda? Amazing how that works.

The last person China wants is Trump. Trump already said he would increase tariffs on China. He also said he would ban the sell of Chinese cars in the United States. Not to mention, he said he sanction China for selling weapons to Russia, which Biden hasn't done.

incomingpain4• 2 years ago

China is telling people Trump will abandon Taiwan, and you believed their propaganda? Amazing how that works.

Gotta read that again; not propaganda. This isn't some straight forward meaning to their words.

The last person China wants is Trump. Trump already said he would increase tariffs on China. He also said he would ban the sell of Chinese cars in the United States. Not to mention, he said he sanction China for selling weapons to Russia, which Biden hasn't done.

China is in a economic depression and probably going to be near its bottom by the end of the year. The fear of tariffs is far lower today and realistically not that necessary.

As I said though, 'suddenly' which essentially I agree with you, but it recently switched.

impossiblefork• 2 years ago

You understand though, that if Taiwan falls, many of these experts may fall into Chinese hands, right?

Letting China win won't give the US a microchip monopoly. It will give China a chance to talk to experts familiar with the state of the art.

msabalau5• 2 years ago

There is nothing "inevitable" about Taiwan falling. China would have to take an inexperienced military and accomplish one of the hardest things imaginable, an amphibious invasion that can only happen in narrow time windows at handful of spots on an island that consists mostly of mountains, jungle and dense urban areas.

It's so hard a task that in World War II the Allied forces (with a ton more experience, and a far more favorable balance of power, chose to invade Okinawa instead, where the US "only" suffered forty eight thousand battlefield casualties. This was still a lot less than the projected causalities of attacking a ridiculously underdefended Taiwan.

The reason for TSMC to diversify is that Xi might be foolish enough to try this, and erratic and isolationist politicians in the US might fail to deter him. Taiwan doesn't have to fall for TSMC to gravely harm TSMC and the global economy, they merely have to start a war.

failuser2• 2 years ago

Imagine if China starts with blowing up TSMC with long-range weapons. How will the West react if Taiwan no longer has that leverage? Before Russia actually invaded Ukraine I was more optimistic about this.

incomingpain4• 2 years ago

There is nothing "inevitable" about Taiwan falling.

Obviously I dont own a crystal ball and cannot predict the future but I stand by the prediction.

China would have to take an inexperienced military and accomplish one of the hardest things imaginable, an amphibious invasion that can only happen in narrow time windows at handful of spots on an island that consists mostly of mountains, jungle and dense urban areas.

Oh for sure you're correct about the technical skill levels of the military, the losses will mount to insane levels. But they kind of need to drastically reduce their incel population.

https://www.usni.org/magazines/proceedings/2020/february/chi...

Their amphibious invasion fleet is literally being built right now. Confirmed via satellite imagery. They arent building these during an economic depression just for laughs.

It's so hard a task that in World War II the Allied forces (with a ton more experience, and a far more favorable balance of power, chose to invade Okinawa instead, where the US "only" suffered forty eight thousand battlefield casualties. This was still a lot less than the projected causalities of attacking a ridiculously underdefended Taiwan.

Technology has greatly improved in the last 75 years. Lets not forget airborne as well.

Remember, Taiwan has no military alliances. Taiwan's total population is around 25 million.

China's PLA strength is probably in the 10 million or so area and I would never assert they are inexperienced. If we're talking inexperience, the incels they wish to shed, we're probably talking 100 million strength. Taiwan has literally no chance of defending against this.

The reason for TSMC to diversify is that Xi might be foolish enough to try this, and erratic and isolationist politicians in the US might fail to deter him. Taiwan doesn't have to fall for TSMC to gravely harm TSMC and the global economy, they merely have to start a war.

The USA has withdrawn. TSMC makes up about 50% of the reasons, but realistically this isn't really about their economic strengths. This is about a unified china and Xi making the history books for a long time.

somenameforme2• 2 years ago

I don't think these campaigns are very comparable. During WW2 we were island hopping, which created an urgency to all actions. With Taiwan, China has a single isolated target. They also have major geographic advantages. Taiwan is 80 miles from China, and nearly all of their important infrastructure is not only coastal but also on the Chinese facing side of the island - most of Taiwan being uninhabited mountainous regions.

They are also a very non self-sufficient island in many forms of production, including food. If China wanted to attack Taiwan, they'd likely just carry out a naval blockade, and it'd probably be unstoppable. In WW2 this was not [regularly] possible, because blockades can take months to years to achieve victory. But when they can be done, they're relatively cheap and extremely effective.

But I doubt China wants a military solution, even if they are 100% certain they would be victorious - because that would not solve the underlying problem, and could even exasperate it. War will probably only happen if Taiwan declares its independence or starts pursuing nukes or relationships that would grant them defacto access to nukes, like e.g. joining NATO. And neither of those seems likely.

j_walter• 2 years ago

This makes sense though...customers are pushing to have chips made outside of Taiwan to protect their supply chain, why not make them pay for that when it's clearly more expensive to do so.

Many companies have already cleared out of China as much as possible (Dell made it clear they wanted all supply out of China by 2024)...Taiwan is the next logical step.

You will start to see the term NCNT (No China, No Taiwan) used more and more...it's already part of many companies internal strategy and corporate planning. Similarly China has a "China for China" policy...where they want everything sold in China to be 100% made in China.

hackuser01• 2 years ago

“they want everything sold in China to be 100% made in China. ”???

Havoc2• 2 years ago

They've been moving in that direction for years.

When you've got a strong industrial base AND a big local market then it becomes common sense both economically and strategically to nudge things in that direction

maxglute3• 2 years ago

PRC has population of OECD countries combined. That's enough of humanity for indigenous everything. US postwar basically maintained autarky across the tech and production tree with 160-300m people before outshoring / ceding strategic industries to others. When PRC has 3x that much people, they can't not eventually aim for ~100% domestic efforts on needs of satisfying job creation alone, and that's what's been happening since they started pumping out OCED combined in tertiary and skilled talent in the last few years - to do the designed in Califorinia part while holding on to as much of the Made in China part.

euratai3• 2 years ago

China is old [1] and broke [2]. It won't be able to afford to attack Taiwan - for reference, 1930s Japan and Germany had way more young people. Japan was also rich from its empire, while Germany transitioned away from gold standard to afford its wars. 2022 Russia thought the war would end in 3 days.

Also, as we see from Russia's invasion of Ukraine, drones and missiles are effective at taking out the world's second largest navy. Taiwan has very accurate and effective homegrown missiles [3]. China would need to amass a ton of ships which would be easily detected, staff them with only sons from families, and try to move them across a 100 mile straits while under the barrage of US/Japan/Taiwan missiles and drones.

Lastly, China is quickly transitioning to state run economy much like Soviet Union [4], which means innovations and growth will be gone forever, especially in tech industries.

[1] https://www.reddit.com/media?url=https%3A%2F%2Fpreview.redd....

[2] https://www.businesstimes.com.sg/international/global/frugal... https://www.scmp.com/economy/economic-indicators/article/325...

[3] https://www.eurasiantimes.com/taiwan-smashes-chinese-warship...

[4] https://asia.nikkei.com/Business/Markets/China-s-favored-sta...

failuser2• 2 years ago

Russia did not stop after 3 days, didn’t it? And there is no indication it will stop any time soon. Russia is also old and broke, but it had enough to keep going. And Russia needs to spend a much higher percentage of the GDP on war than China. I’m pretty sure China can take Taiwan if it wants to, I just hope the estimated price will be too high for them to actually pull the trigger.

cabirum• 2 years ago

Wtf are you talking about? China is the world's largest maker and exporter for drones. Their swarms will easily annihilate anything US/Japan/Taiwan on their way.

The only question is what costs more: taking Taiwan by force or developing Chinas own tech and watching TSMC go broke.

Also: quotation needed. Who and when said "the war would end in 3 days."?

swatcoder2• 2 years ago

If I'm trying to anticipate the future and had to choose between trusting the very expensive, very disruptive actions of nation states and multinationals as they prepare for (minimally) a trade break with China, and a handful of articles from relatively small publications (and reddit!) that say it's nothing to worry about, I'm going to go with the former.

That doesn't mean the nations and corporations are right, but the world is reconfiguring as if they were either way.

bobthepanda• 2 years ago

the problem with saying that war is impossible is that it always looks impossible before it happens.

while Ukraine hasn't been taken over, their economy isn't exactly doing hot since everything is at risk of bombardment. Likewise, it's likely that even if Taiwan were not to immediately fall, that TSMC facilities would be damaged, and even if they weren't, it would be a major danger to ship anything out of Taiwanese ports; shipping out of Odesa has not been smooth sailing.

throw1234651234• 2 years ago

1. Go here: https://www.thetruesize.com/

2. Type in "Taiwan"

3. Type in "Ukraine"

4. Overlap them.

5. Go here: https://www.globalfirepower.com/countries-listing.php

6. Find China & Russia

7. Now find Taiwan & Ukraine.

8. Ratio China/Taiwan and Russia/Ukraine.

blackoil• 2 years ago

China is subject to so much arm chair analysis that the hubris here is now not even funny. It is on verge of collapse for last 20 years. People are about to revolt for longer and there won't be any original product /research. They are attacking Taiwan anytime now for 30 years.

jbirer• 2 years ago

I am expecting a Brexit-like situation where it starts out with nationalistic euphoria and then dreams come crashing when people realize the reality of doing everything at home (tm). Globalism is so succesful for a reason.

jonfw• 2 years ago

It's not that people want everything made in the US, it's that they don't want everything made in China.

api• 2 years ago

Just get Putin and Xi Jinping back on board and we're fine then.

zer00eyz• 2 years ago

As an american everyone has an opinion, and belongs to some sort of clique.

China has state media, censorship, and there are some very loud voices that parrot what the party wants. I have the understanding that many Chinese see through a lot of the bullshit (and because of personal experience at that).

What there has been is more protests in china. From the white paper to recent wage protests. It's getting harder to cover over the dissatisfaction and people are being vocal. And the youth movement of lying flat is fascinating in light of the demographics.

The colapse there is going to be sudden, sharp and will impact the globe.

Havoc2• 2 years ago

I could see it for the US...I'd imagine there are many US commercial buyers that would be willing to pay a premium - ranging from modest (e.g. cloud) to whatever it take (military).

Rest of the world...doubt it.

TSMC expects customers to pay more for chips fabbed overseas

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