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TSMC might relocate NT$500B next-gen chip fab to U.S.

TSMC might consider setting up next-generation 3 nanometer processing fab in the U.S. instead of in southern Taiwan

TSMC's new office in Taiwan.

TSMC's new office in Taiwan. (CNA photo)

TAIPEI (Taiwan News) -- World-leading semiconductor manufacturer Taiwan Semiconductor Manufacturing Company (TSMC) might consider setting up its new 3 nanometer (nm) chip fab, construction of which will cost NT$500 billion (US$1.64 billion), in the U.S. and forgo earlier plans of establishing the new manufacturing site in Southern Taiwan Science Park to meet client demand.

Taiwan’s top semiconductor company, TSMC, initially planned to establish its new 3 nm semiconductor fab at the science park in Kaohsiung City, but company evaluations noted that to complete environmental impact assessments (EIA) it would be unable to meet its 2022 mass production deadline.

It took TSMC three attempts before Taiwan’s Environmental Protection Administration (EPA) approved the EIA of its 10 nm semiconductor chip factory expansion plan in Central Taiwan Science Park in late 2016; moreover, the company’s 5 nm process fab expansion only passed the nation’s EIAs in early 2017.

If the company is held back by EIAs, it will be difficult for it to implement plans to overtake competitors with 3 nm processing technology, reported UDN.

TSMC intends to get ahead of competitors including Samsung and Intel by speeding up the deployment of 3 nm processing by constructing a new plant in the U.S.

Both Samsung and Intel are focusing resources on 7 nm processing, with Intel raising its capital expenditure in nanotechnology by 20 percent to US$12 billion.

Samsung has maintained investments in 7 nm processing at US$12.5 billion, while TSMC intends to inject US$10 billion in the technology this year.

Heavy air pollution in the southern city and looming electricity shortages were also listed as factors in company evaluations.

The new 3nm processing fab in Southern Taiwan Science Park would consume 250,000 metric tons of water per day, and raise electricity consumption by 700,000 kilowatts, raising questions of whether the country’s strained electricity capacity could meet TSMC's additional demand.

It is no surprise that TSMC is planning to move its new plant to the U.S., as its major clients Apple and Nvidia are being pressured by U.S. President Donald Trump’s protectionist policies to relocate manufacturing back to America, said an industry source.

TSMC’s current market value is about US$162 billion, and if mass production of 3nm semiconductor chips are rolled out by 2022, the company could possibly overtake Intel, which possesses a market value of US$166.7 billion.

If TSMC intends to move its advanced 3 nm manufacturing node from Taiwan to the U.S., the company will start outsourcing a large portion of future manufacturing to China, according to the UDN report.

Taiwan's Minister of Science and Technology (MSOT) Chen Liang-gee (陳良基) has reached out to TSMC management to convince the company to keep investments in the country.

In response to the industry rumors, TSMC stated it is still evaluating the appropriate manufacturing site for its 3nm processing fab, and related evaluations will continue until at least first half of 2018.

Possibilities of moving the fab to the U.S. are still on the table, as the company evaluates client demands, and water and electricity demands, but it is too early to comment on the final decision, stated TSMC.

According to TSMC chairman Morris Chang (張忠謀) there is little difference in fab labor costs in Taiwan and the U.S., the comprehensive semiconductor supply chain in Taiwan has been the primary reason that the company keeps most semiconductor manufacturing in the country.

A netizen responded, "If TSMC leaves Taiwan, then it is GG (Good Game or game over) for us.”