Spread of Chip Plants Beyond Established Hubs Will Add to Costs

choi

(1) Kathrin Hille, Spread of Chip Plants Beyond Established Hubs Will Add to Costs. Financial Times, July 28, at page 6 (under the heading "Inside Business" "Asia").
https://www.ft.com/content/617b4505-68c2-437f-8ba0-f42bd8b667b4

Consecutive paragraphs”

"But under pressure from governments in Washington, European capitals and Tokyo, the company's management is taking the screwdriver to the well-oiled machine that is TSMC[, building a fabrication plant , or fab, in Arizona and considering a site in Japan and 'even' Germany: even is from FT, not me]. Company chair Mark Liu told investors this month that 'the new geopolitical environment' called for distributing TSMC's fabs more widely beyond its home base.

John Lee, a technology analyst at the Mercator Institute for China Studies in Berlin, says the push for reshoring semiconductor manufacturing in various geographies has been 'really a state-driven thing.'

" * * * scattering fabs around the world has a price that TSMC's customers will have to pay.

"According to a report by Boston Consulting Group and the Semiconductor Industry Association (BCG/SIA) published in April [see (2) below], the total cost of ownership of a fab in the US is between 25 and 50 per cent higher than in Asia.

"In Europe, there is a 30-40 per cent 'cost disadvantage' in chip manufacturing compared with production in Asia, according to Greg Slater, Intel's regulatory affairs executive.

'It is very hard to imagine that the funds that are being stumped up now will be enough to bridge that 40 per cent gap,' Lee says of the subsidies western governments are promising TSMC and other chip manufacturers if they build fabs in their countries.

"According to the BCG/SIA study, financial support from governments in China, Taiwan and South Korea accounts for 40 to 70 per cent of the cost advantage chip manufacturers enjoy in those countries compared with the US.

"TSMC has already made clear that its customers will have to shoulder part of the cost. “[We] face manufacturing cost challenges . . . Therefore, we are firming up ]read" increasing] our wafer pricing,' chief executive CC Wei said earlier this month.

"The question is what will really be gained by the changes.

Note:
(a)
(i) Mercator Institute for China Studies
https://en.wikipedia.org/wiki/Me ... e_for_China_Studies
(ii) Stiftung is German noun feminine meaning foundation.
(iii) A Portrait of Stiftung Mercator; History, strategy and the way we work. Stiftung Mercator, undated
https://www.stiftung-mercator.de ... iftung_Mercator.pdf
("Stiftung Mercator is named after Duisburg cartographer Gerhard Mercator and was founded by Duisburg entrepreneurial family Karl Schmidt in 1996")
(iv) Duisburg is 15 miles north of Dusseldorf. Gerhard Mercator (whose a in English -- I do not know about Latin pronunciation -- in the surname is same as that in ace or fate] was born in 1512 in modern-day Belgium and died at age 82 in Duisburg.
(v) mercato (noun masculine): "merchant"
https://en.wiktionary.org/wiki/mercator
(vi) Mercator projection
https://en.wikipedia.org/wiki/Mercator_projection
(b) stump up (phrasal verb): "British, informal : to pay (an amount of money) especially when one does not want to"
https://www.merriam-webster.com/dictionary/stump%20up


(2) Antonio Varas, Raj Varadarajan, Ramiro Palma, Jimmy Goodrich, and Falan Yinug, Strengthening the Global Semiconductor Supply Chain in an Uncertain Era. BCG + SIA, Apr 1, 2021.
https://www.bcg.com/en-us/public ... ductor-supply-chain

"Since the invention of the integrated circuit back in 1958 [Moore's law] * * * Coupled with engineering innovations such as advanced packaging and materials technology, this has allowed electronic device makers to create devices with exponentially more computational power in increasingly smaller form factors. As an illustration, today’s smartphones have more computer power than the mainframe computers that NASA used to send Apollo 11 to the moon in 1969. Today's smartphones also contain more memory for storage than a data center server in 2010." pages 7-8.

"Understanding semiconductors: what they are and what they are used for [which is sectional heading] * * * (1) Logic (42% of industry revenues) These are integrated circuits functioning on binary codes (0 and 1) * * * [One of the categories in logic is] Microcontrollers (MCUs) are small computers on a single chip. A microcontroller contains one or more processor cores along with memory and programmable input/output peripherals. MCUs perform basic computing tasks in myriads of electronic products such as cars, industrial automation equipment or consumer appliances. (2) Memory (26% of industry revenues) * * * (3)  Discrete, Analog, and Other (DAO) (32% of the industry revenues) These are semiconductors that transmit, receive, and transform information dealing with continuous [note 'continuous'] parameters such as temperature and voltage"  page 9.

Take notice that segment economics for IDM (such as Intel), fabless and foundries are similar, except R&D in fabless is negligible (4%). Pages 24-25.   
cash flow
https://en.wikipedia.org/wiki/Cash_flow  
("Operating cash flow: refers to the cash received or loss because of the internal activities of a company such as the cash received from sales revenue or the cash paid to the workers")

Starting page 33 ("Foreign talent contributes decisively to the US leadership in semiconductor innovation [namely R&D] to page 35, whose Exhibit 17 has the heading "Breakdown of the global wafer fabrication capacity by region [which does not necessarily means ownership: Micron acquired Elpida of Japan and Powerchip and Rexchip of Taiwan] , 2019 (%)" that showed: Memory: US (5%), China (14), Taiwan (11), S Korea (55), Japan (20) and others (4); DAO: US (19%), China (17), Taiwan (~1.5), S Korea (5), Japan 27), Europe (22) and others (7).

My comment: There is no need to read the rest of this report.