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TSMC’s Overseas Ventures: Balancing Growth Amid Rising Costs and Semiconductor Shortages

Taiwan Semiconductor Manufacturing Company (TSMC), the leading global semiconductor foundry, unveiled plans in October 2021 to construct its inaugural facility in Japan, signalling a potential surge in expenses as it broadens capacity beyond Taiwan. The proposal is subject to board endorsement, amid an international semiconductor scarcity that has profoundly impacted various sectors, particularly automobile manufacturing.

Governments worldwide are actively pursuing investments from prominent Asian semiconductor producers, such as South Korea’s Samsung Electronics, Taiwan’s TSMC, and Intel. Transitioning to areas with less-developed infrastructure will inevitably escalate costs. International factories will likely generate lower profits compared to existing businesses and that TSMC’s Japanese factory could impose additional financial strains.

According to TSMC CEO C.C. Wei, the Japanese government will provide subsidies for the new factory, although specifics remain undisclosed. Production is slated to commence in May 2024. TSMC is concurrently constructing a semiconductor facility in Arizona, USA, where costs are anticipated to surpass those in Taiwan. The company remains open to establishing factories in other regions, including Europe.

TSMC foresees a substantial increase in wafer prices due to production capacity expansion while maintaining profit margins above 50%. TSMC’s dedication to high margins indicates clients’ willingness to pay premium prices to secure semiconductor supplies.

The introduction of cutting-edge nodes, such as the 3nm process technology “N3”, is expected to further elevate manufacturing costs. Wei attributed the cost hike to technical intricacy and the requirement for costly, advanced equipment.

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