The state is free to, and often does, engage in non-profitable production to ensure essential domestic needs can be satisfied.
This doesn't make sense from a market perspective, but it can often make sense from a needs based perspective.
Of course, you can always have a newcomer who can disrupt the market but most Moore's law advancements appear to happen in government funded research labs and large semiconductor companies.
Investors will not tolerate time lines of 10+ years and hundreds of millions to billions of dollars sunk.
No more than Taiwan getting blown up. It's going to be about balance. No good to have all the eggs in a single basket, whether that is TSMC or some subsidised national attempt.
Note that this announcement comes right on the heels of TSMC announcing that they aren't reducing their prices this year.
The USG is perfectly happy to spend taxpayer money and foreigners' money to make their corporate constituency happy even if the financial equation is overall negative.
I think the leadership at TSMC is being a little naive. Alternatively, they may know very well what's going on here and they are being willfully obtuse to paint as bright a picture as possible of their long-term prospects.
> I think the leadership at TSMC is being a little naive. Alternatively, they may know very well what's going on here and they are being willfully obtuse to paint as bright a picture as possible of their long-term prospects.
It could be two things:
1. Some arrogance, "hah, this is harder than you think"
2. They're trying to discourage the competition because they know it will hurt their bottom line.
Even if they only lost 10% of their revenue, that can still hurt a lot. They could go from being a growing business to stagnating or shrinking.
You can’t just build a modern foundry with any amount of money. TSMC is part of a massive supply chain and engineering cluster. If you wanted to build something that looked like TSMC and in an emergency could produce something in six months you are probably talking about tens of billions per year at a minimum. Most of your costs are things TSMC gets paid for.
Since that doesnt really make sense you probably want a homegrown competitor. You just don’t have the domestic experience and expertise to replicate what TSMC has; It will never be cost competitive. TSMC can send billions on fabs and recover their costs and a domestic alternative will never be able to. Modern chips have to be adapted to each foundry; a homegrown alternative will have to eat this cost at first just to get orders.
If you want to be competitive you need to go big and stay there. Something like $100 billion a year for the foreseeable future would be the minimum. You could probably limp along with massive discounts.
If the plan was to replace TSMC entirely, well, I'd think he was justifiably concerned as (a) a threat to his business and (b) evidence that the US was decoupling from Taiwan. But I don't think that's the case.
IMHO there are some similar trends with EU agricultural policy, where arguably one of the reasons (not much discussed to general public, but obvious if you look at what's being done) for sustaining farming subsidies in sectors where EU would be uncompetitive (due to climatic reasons and labor costs) is the strategic goal to ensure that EU does not become reliant on imported food even if it can be farmed cheaper elsewhere, so that in case of major geopolitical disturbances in coming decades (e.g. caused by climate change) there's local farmers, farmland, skills and infrastructure for that. The costs seem huge, but in proportion to the whole economy they're affordable - the same would apply for on-shore chip fab capacity that's needed for strategic self-sufficiency of key resources.
On the other hand, I fully agree with the TSMC statement that it would be economically unrealistic for EU to expand semiconductor fab capacity to fully satisfy their own needs - it's feasible to expand fab capacity so that you have some onshore supply of modern chips, but it's impractical (and IMHO not within plans of any politician) to ensure that there would be enough fab capacity to supply all the consumer consumption, the expectation is that most of the volume would still be supplied from Taiwan and elsewhere.
Regardless, even if it is the former goal, it is still a potential threat to TSMC profits. Personally, I would not look at it in terms of Liu (mis)understanding, but acting in his own self interest to maximize his profits.
for a large market like the US/Europe couldn't they choose to not participate in the global market for chips? or tip the scales such that local competitors are favored?
I don't see any reason why certain products couldn't be on a sliding tariff scale dependent on how much is imported. 20-40% imports = no tariffs, 80% triggers a sliding tariff scale. This would allow for strategic preservation and global competition. Once you fully outsource an industry it's hard for it to ever grow back - even if it makes sense for it too.
If it's a matter of subsidizing one industry to favor the overall economy (e.g. more chips so the automotive and other sectors don't slow down), then nations also get involved. China pretty much directly and openly, and the US/Europe more indirectly.
Your tariff method would work for say mining copper or say iron screws but not for a fab factory as it can't really be scaled halfway
They reported highest level of education for their workforce of: 4.5% PHD, 44.9% Masters, 25.5% Bachelors.
Edit: chip shortage has been a known variable for over a year now. I think TSM overplayed its hands a bit. They didn’t want to expand and get caught when the demand would subside, which is very understandable. But what they didn’t foresee is that the US govt would get involved in propping up its competition in direct response.
These people are awful.
That's like saying you should never use anything other than RAID0 because anything else costs you more for the same performance. Yeah, sometimes cost/performance aren't the only important metrics!
The pandemic has literally been a real-life example of the downsides of the approach he is advocating.
Sounds like a tricky situation for everyone, don't want to alienate Taiwan or Apple or China. And TSMC is building capacity in the US. It isn't really a West vs. East game.
