TSMC's Arizona Chip Facility Faces Severe Financial Strain
TSMC's epoch-making investment to an Arizona facility, one of the U.S.'s foremost landmark projects towards domestic chipmaking, is under significant financial stress. Ctee's report states that profits earned from TSMC's U.S. operation have plummeted quarter-on-quarter from NT$4.232 billion to just NT$41 million, largely due to the high cost incurred by the semiconductor build-up.
Strategically very important, yet unshackled from immediate financial realities
The Arizona facility has critical strategic importance in building a global chip supply chain that is less vulnerable to geopolitical conflicts. Strong customer interest in U.S.-based manufacturing drove TSMC's investment; this has been a trend that intensified during the Trump era. But creating this supply chain in the U.S. is proving to be an exceedingly more expensive undertaking.
Why U.S. Manufacturing is Increasingly Costly
The precipitous plunge in profitability is linked to several key factors with no small emphasis on the push for producing advanced chips as customer demand rises and with such demand appearing from the AI sector.
- Production on Advanced Nodes: Setting up production lines for the advanced 3nm chips at Arizona Fab 2 facility requires extremely expensive process equipment. This is a deviation from the first facility, which was more qualifiedly successful by focusing on the more mature nodes.
- Higher Operational Costs: Manufacturing in the United States by itself incurs higher costs for labor as well as construction than in other parts of the world.
- Talent Sourcing: This further raises operational costs as hiring for a significant part of the pool competes in Taiwan.
Looking Ahead Profitability Expected to See A Downtrend
The push for high-end nodes like 3nm and beyond will continue to ask more and more. So, the profitability ratios for TSMC's U.S. operations are expected to stay significantly lower than in its facilities elsewhere. The company has to strike a balance between the strategic necessity of its presence in the U.S. and these hard financial realities.
