Can the US really rebalance global chip production? #1 Greg Ip WSJ on Labour
The U.S. is trying to do something unprecedented: reverse a shrinking share in a key manufacturing sector. Between 1990 and 2020, the U.S. share of world chip making shrank to 12% from 37%, while the combined share of Taiwan, South Korea and China grew to 58%.
Subsidies alone won’t guarantee a sustainable industry. Fabs need customers, a supply chain and, above all, a skilled, specialized workforce. The theory behind CHIPS is that, by matching Asia’s subsidies, the U.S. can again be competitive in chip making. Nonetheless, there is a chicken-egg problem. Fabs need a ready supply of skilled workers. But without fabs, America’s best and brightest have little incentive to pursue careers in the sector.
South Korea and Taiwan, by contrast, can count on “captive” graduate labour forces locked into their chip industries.
Can the US really rebalance global chip production? #2 Technology - all-star tech team at the FT
Taiwan Semiconductor Manufacturing Company’s decision to bring its latest technology to America is a big step forward for US President Joe Biden’s quest for security in the vital tech supply chain — but still leaves Washington short of being able to completely produce the most complex chips in the US. The world’s biggest chipmaker by sales must also pull off an intricate balancing act as it steps up its US presence, satisfying customers such as Nvidia without damaging its highly profitable business model, which has underpinned the development of the global semiconductor industry for more than 30 years. TSMC’s planned $65bn of investments in Arizona are part of a construction race in the US that involves other global chipmakers such as Samsung and Intel, which are also taking big subsidies from Washington. But producing chips for purposes such as AI is still likely to involve plants in Asia, a reflection of the complexity involved in packaging various types of chip together to boost their performance and efficiency.
TSMC — which makes chips under contract at hugely complex and expensive fabrication plants, or fabs — plans to start manufacturing 2-nanometre chips in the US in 2028. This is an upgrade from the company’s previous plans. At that time 2nm technology is expected to be the latest in mass production worldwide, whereas previously the company had intended each new US fab to start operating with process technology one generation behind Taiwan. TSMC has also committed to offer a third plant using 2nm or even newer technology by 2030. Washington is paying a hefty price for the upgrade, with US$6.6bn in grants and up to $5bn in loans for TSMC. .... Commerce secretary Gina Raimondo has said the US will be on track to make about 20 per cent of the world’s most advanced chips by the end of the decade. But while Washington’s money offers some incentive, TSMC’s most important motive for stepping up its commitment to the US was to bring its own US strategy in line with the needs of Nvidia and other vendors of the AI chips that have become the most potent driver of global semiconductor demand. … The new plan will allow Nvidia and other sellers of AI chips to shift some of their orders from Taiwan to Arizona. US chipmaker AMD, one of Nvidia’s biggest rivals in the AI chip market, plans to be one of the first customers of the Arizona plant with high-end graphics processing units and central processing units, according to a person familiar with the company. But giving clients the right to choose where their chips are made departs from TSMC’s established practice. It would reduce the company’s flexibility in allocating capacity, which has helped it to generate gross profit margins of more than 50 per cent. People familiar with discussions between TSMC and its clients said any access to a specific plant will have to be laid down in separate agreements with … Mobile chips made for Apple, TSMC’s largest client, may bear the heaviest impact from the resulting gap between capacity in US and Taiwan. TSMC usually makes smartphone chips first with its latest processing technology, serving high-performance computing products a year or two later. “Apple has always been the first adopter of a node. So if the Arizona fabs are a bit behind, then maybe they could only meet Apple’s needs for older models,” Xie said. Furthermore, TSMC by itself cannot ensure AI chips will be made in the US, as commerce secretary Raimondo has claimed. To make the complex devices, various logic and memory components made in South Korea and Taiwan need to be assembled and integrated, a process known as advanced packaging. This month, South Korean memory-chip maker SK Hynix announced it would build an advanced packaging facility in the US state of Indiana to produce “high-bandwidth memory” chips (HBM) — made by stacking memory chips on top of a logic base die made by TSMC — to be used in Nvidia’s most powerful GPUs. But the memory chips themselves, known as Dram, will continue to be produced by SK Hynix’s facilities in South Korea. “Samsung and SK Hynix are making the minimum possible investment in the US, and only then because of geopolitical pressure, so they are unlikely to build separate plants in the US for advanced memory chips,” said CW Chung, an analyst at Nomura. … The Taiwanese contract chipmaker has shown no appetite for building an advanced packaging facility in the US, in part because its Arizona capacity is too small to make such a plant viable. … “Customers would rather go for best in class rather than an all-in-one facility”.