The Chip Insider®–US/Taiwan cost differences, Trump’s Tariff Day impact
Author: G. Dan Hutcheson
Analyzing US vs. Taiwan chip manufacturing costs, with insights on strategic vs. tactical pricing and the effects of Trump-era tariffs.
US/Taiwan manufacturing cost differences: Hi Dan, TechInsight’s “Strategic Cost and Price Model” shows a cost-per-wafer … that’s more than 2X higher, not the “less than 10%” you wrote about in the March 14th edition of The Chip Insider. What’s the difference?
As Bob Boehlke, one of the greatest CFOs our industry has ever seen, used to say. “There’s cash. Everything else is accounting.” As written, I was doing a like-for-like comparison of two hypothetical fabs of the same capacity built at the same time to process with exactly the same equipment… Fab 18 in Tainan has two huge tactical-cost advantages … Much of the early costs have been depreciated… Still, the tactical cost comparison is very useful, which is the beauty of TechInsight’s “Strategic Cost Model”—It can be used for both strategic and tactical planning.
One of the oldest rules in semiconductor competition is that you never compete against a depreciated fab with a new one. Incumbents have a full advantage. Intel used this … So, when TSMC builds a new fab it can balance … Coming back to Boehlke, the cash angle is where it gets interesting…
Trump’s Tariff Day impact: Trump’s tariffs ignited the second greatest day of wealth destruction in history… Trump’s Tariffs have also shot him in the foot when it comes to his efforts to bring advanced chip manufacturing back to the US. That is, unless he rescinds tariffs on globally sourced semiconductor production equipment, components, materials, and consumables… If not, the difference in … Cost-per-Wafer for the US will come close to the 25% tariff Trump threatened. At these levels, it becomes a no-brainer to keep production in Taiwan…
On the first order … the cost of bringing in a Hi-NA EUV module just went from $500M to $604M. Of course, you need at least two, so the tariff cost of bringing the toolset into the US is $208M. We’re not talking petty cash here... the second order … Even so-called US equipment may be made elsewhere or have significant amounts of imported components... As I look at it, every board of every semiconductor company has to be re-evaluating where they plan to build fabs over the next four years, as well as considering capex cuts…
“There’s cash. Everything else is accounting.” — Bob Boehlke
