Analysis Taiwan Semiconductor Manufacturing Co., also known as TSMC, plans to spend $100bn over the next three years in response to chip demand and has advised its customers to expect to pay more.
Word of the firm's investment plan comes from Nikkei Asia, which claims to have seen a letter from TSMC CEO C.C. Wei outlining the investment plan. It follows closely on the heels of Intel CEO Pat Gelsinger outlining Intel's foundry strategy and spending plans.
The demand for semiconductors reflects the lack of supply, which Falan Yinug, director of industry statistics and economic policy for the Semiconductor Industry Association, in February attributed to pandemic-related demand – IT purchases to support remote work – and the increased use of semiconductors in vehicles.
"The shortage is a reminder of the essential role semiconductors play in so many critical areas of society, including transportation," said Yinug in a blog post. "This trend will only continue as demand for electronics and connectivity grows."
The drought in Taiwan, where TSMC is based, hasn't helped.
Yinug argued that the shortage should be addressed by more federal support for chip manufacturing in the US and attributed the declining US share of the global semiconductor market – from 37 percent in 1990 to 12 percent today – to foreign government subsidies of foreign competitors that have gone unanswered.
Micron chief warns 'severe shortage' of DRAM expected to continue this yearREAD MORE
A week later, the US-focused trade group sent a letter [PDF], signed by the CEOs of AMD, Intel, and other US chip makers, to US President Joe Biden asking for "substantial funding for incentives for semiconductor manufacturing."
Biden on Wednesday rewarded the industry by asking Congress, as part of his American Rescue Plan, "to invest $50 billion in semiconductor manufacturing and research, as called for in the bipartisan CHIPS Act."
If Biden's plan gets approved, chipmakers may also see a halo effect from adjacent spending contemplated under the economic stimulus program, like $20bn for regional innovation hubs and community revitalization, $14bn for NIST "to bring together industry, academia, and government to advance technologies and capabilities critical to future competitiveness," and $50bn for the National Science Foundation (NSF) to create a technology directorate focused "on fields like semiconductors and advanced computing, advanced communications technology, advanced energy technologies, and biotechnology."
Another piece of US legislation proposed last year, the America Foundries Act of 2020, would offer as much as $25bn in grants to US states to fund fab facilities if it becomes law.
US chipmakers have already made comparable commitments, with Intel last month promising $20bn to build two new fabs in Arizona as a part of its planned foundry business.
But Intel will have competition there. Last year, in May, TSMC also tapped Arizona as the location of a planned $12bn semiconductor fab it plans to build. And Samsung Foundry as of January was casting about for government subsidies to build a new fab site in Arizona, New York, or Texas [PDF], a deal estimated to be worth $17bn and part of its plan to spend $116bn on its foundry and chip business over the next decade. Both projects aim to be operational in 2024.
The EU in March, as part of its Digital Compass plan, said it wants to double its chip output to 20 per cent of the global market by 2030. The following day, Apple, a TSMC customer, said it would invest over €1bn in a European chip design center based in Munich, Germany.
According to a Congressional Research Service report published October 26, 2020, "Semiconductors: US Industry, Global Competition, and Federal Policy" [PDF], Taiwan, South Korea, and Japan accounted for two-thirds of the world’s semiconductor fabrication capacity in 2019, and China was responsible for 12 per cent of global fabrication.
The report notes that US legislators have become increasingly concerned about the concentration of chip manufacturing in East Asia and the implications that has on the semiconductor supply chains in the event of trade conflict or warfare.
The federal government appears to be ready to pay to shift the center of chip-making gravity to more accurately reflect US interests. But other countries and foreign competitors have their own ideas about where chips should be made. ®