TSMC's Arizona facility has been a massive 'landmark' for America's chip industry, but rising costs have taken out an enormous chunk of profits, putting pressure on the firm's operations.
TSMC's US Operations Are Getting a Lot More Costlier, Especially With the Push For Advanced Chip Manufacturing
The investments made by the Taiwan chip giant in the US were seen as an optimistic development, considering that they have opened up the prospect of America having an independent supply chain. However, according to a report by the Taiwanese media outlet Ctee, it is disclosed that TSMC's US operations saw a huge QoQ decline in profits, from NT$4.232 billion to NT$41 million, associated with the massive semiconductor buildout the company is involved in. Moreover, plans to introduce high-end nodes in the US are also one of the reasons why TSMC faces high expenses.
TSMC's Arizona facilities hold strategic importance, not just for America's chip industry, but also in how they enable the world to establish a supply chain that is 'free from' geopolitical conflicts. One of the significant reasons TSMC was quick to invest in the US was its customers' inclination towards US manufacturing plans, which became even more aggressive with the Trump administration's takeover. However, it appears that building a chip supply chain in the US comes with significant implications, one of which is that it is substantially more expensive.
According to the report, TSMC's Arizona Fab 2 is expected to see a drop in profitability rates, mainly because the Taiwan giant is pushing for the creation of production lines for chips like 3nm, which ultimately requires expensive process equipment. The first facility in Arizona proved to be a massive success for TSMC, considering that it focused on the production of 'relatively' mature nodes, but with the AI hype, customer demand also increases, which means that the chip giant needs to adapt rapidly to sustain its operations and client relations.
There's no doubt that manufacturing in the US is an expensive venture, mainly because it requires higher costs in the form of labor and construction, as well as a talent pool that is heavily sourced from Taiwan. And since the push for high-end nodes like 3nm and beyond will require more resources, the 'profitability ratio' of TSMC's US operations will remain lower relatively to other regions.
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