In a bid to lower the cost of establishing its Arizona fab, TSMC has come up with a unique model to control the expenditures, dubbed as “Shipped from Taiwan, Assembled in the US.”
Construction of TSMC’s US$12 billion fab is already underway, with production scheduled in 2024, pumping out 20,000 wafers a month. TSMC has also started reviewing the feasibilities of establishing fabs in Japan and Germany. If proven feasible in the long term, TSMC might ultimately replicate the above-mentioned model as it eyes global expansion.
According to various sources, it would cost TSMC approximately US$1.7 billion to build the clean room and other basic facilities essential for the fab in Arizona, at least five times higher than what it would cost in Taiwan. Those familiar with clean room construction pointed out that the desert environment in Arizona, the relatively inconvenient conditions for transportations, and the higher labor costs have all contributed to the higher expenses of setting up fabs in Arizona.
As it seems, TSMC has decided to have them shipped to the USA, where they will be assembled. Even when TSMC opted for the said model, the transportation cost would reach US$107 million at least. Given the skyrocketing cost of shipping amidst an unfolding shipping crisis, TSMC insiders revealed that the “Made and Shipped from Taiwan, Assembled in the US” model is still 20-30% lower than directly sourcing the components in the US and assembling them locally. An estimated amount of US$143 million would be saved. TSMC expects that 4000-5000 containers would be needed for the shipping, and aims to start the first round in October.
Earlier this year, TSMC has just adjusted its capital expenditure in 2021 to US$30 billion, while earmarking expenditures of US$100 billion over the next three years. Its attempt to navigate through fault lines, however, has risen fears of an overstretch, with some questioning TSMC’s long-term ability to keep its gross margin above 50%.