Over the past few months, we have published several stories about the efforts of U.S. companies to increase domestic semiconductor manufacturing capabilities. Intel, in particular, is spending billions to expand its manufacturing capabilities in the U.S. and Europe. It is one of several U.S. companies that are pushing to ratify CHIPS for America. Intel CEO Pat Gelsinger sees the bill as critical to protecting the future of the U.S. semiconductor industry.
Recent comments by TSMC founder and former CEO Zhang Zhongmou have put the spotlight on the many problems the U.S. faces in rebuilding its domestic chip manufacturing industry.
Zhang is a guest Brookings Institution Think Tank (pass register). Speaking on Tuesday, Chang said the U.S. simply does not have the manufacturing talent pool it needs to expand and succeed. The U.S. has the best design talent, but its education system cannot provide the thousands of skilled manufacturing workers it needs, he said.
There is also the issue of labor costs. Labor is cheaper in Asia, which Chang emphasized when talking about setting up TSMC’s Oregon factory. “We really want the cost to be comparable to Taiwan,” he said. “That would be naive… We still have about a thousand workers in that factory, and the cost of that factory is about 50 percent higher than that in Taiwan.” Zhang went on to say , “Now you’re talking about subsidies that cost tens of billions of dollars. Well, that’s not enough. I think it’s going to be a very expensive futile exercise”.
U.S. companies are known to want to reduce their reliance on Asian chipmakers for a variety of reasons, including protecting and simplifying fragile supply chains and as a hedge against global geopolitical instability.
In any case, it will be many years before the U.S. effort to increase domestic chip capacity is successful. Building a state-of-the-art manufacturing facility takes years, from handshakes to breaking ground to products hitting shelves.
Geopolitical issues always surface, and a supply-side shock would be catastrophic for the global economy if TSMC suddenly stopped production. Zhang said of the possibility of a war between China and Taiwan: “Frankly, if there is a war in the Taiwan Strait, then I think the U.S. has to worry about more than just leverage.”
This is true for all of us.