The much-lauded CHIPS Act is not going well. And TSMC, which is supposedly to be one of the Act’s biggest beneficiaries, is starting to hedge against a failing industrial program.
Since its passage 16 months ago, the Act’s implementation led by the Commerce Department has done very little to restore US leadership in semiconductors. Specifically, on subsidizing and supporting advanced chips manufacturing, the program has only made two relatively inconsequential grants so far – $35 million to BAE Systems, $162 million to Microchip Technology – both for making mature (meaning old, not advanced) chips that are commonly used in the defense industry.
There is, of course, nothing wrong with supporting defense contractors and companies that supply the defense industry; onshoring the production of chips that our military relies on is important for strengthening national security. However, if the reason why we needed the CHIPS Act was to onshore advanced chips manufacturing by leading foundries – TSMC, Intel, Samsung – all of which have been lured to building more fabs in the US under the assumption of receiving sizable government subsidies, this industrial program is simply not delivering.
In TSMC’s Q4 2023 earnings call earlier this week, Mark Liu, the company’s outgoing chairman and point person in driving its expansion into America, gave us some clues to how TSMC really feels about the situation.
Mark’s Last Words
In his prepared remarks for probably his last earnings call, Liu shared this progress update for investors on TSMC’s Arizona fabs:
“In Arizona, we are in close and constant communication with the U.S. government on incentive and a tax credit support and making strong progress in facility supply chain infrastructure, utility supply and equipment installation for our first fab. We continue to work closely and develop strong relationships with our local union and trade partners in Arizona, including recently signed an agreement with Arizona Building and Construction Trades Council on a new framework for cooperation….
We are well on track for volume production of N4 or 4-nanometer process technology in the first half of '25 and are confident that once we begin operations, we will be able to deliver the same level of manufacturing quality and reliability in Arizona as from our fabs in Taiwan.”
While the delay in operationalizing TSMC Arizona’s first fab to 2025 has been widely reported, this is the first time the company shared a more precise timeline for volume production – first half of 2025. It also looks like TSMC’s tense relationship with local unions has come to a steady state, where at least work will move forward and not be stalled by possible strikes or more public relations complaints and campaigns. Furthermore, the CHIPS Act subsidy is still being haggled over with the US government. TSMC is reportedly seeking $15 billion in tax credits and subsidies (out of a pool of $39 billion). But negotiations have been difficult because the Commerce Department is attaching a lot of strings to the money, including compelling the sharing of confidential information about operational details and customers, which is just a big no-no for the foundry business model that TSMC pioneered. (Samsung has raised similar objections to this condition.)
But this is not the hedge; these issues have been widely anticipated (and still unresolved). The hedge against the CHIPS Act came when Liu was asked about the second fab that TSMC plans to build in Arizona. Here is what he said when an analyst asked about it:
“The second fab shell is under construction. But what technology in that shell is still under discussion, and I think that also has to do with how much incentives that fab – the U.S. government can provide…there will be a gap, at least current planning is '27 or '28…that will be the timeframe...
All the fabs in overseas, what's actually being loaded, what technology is being set up, really, it's a decision of customers' demand in that area…so nothing is definitive.”
The 2027/2028 timeline is a further delay from the previously shared 2026 deadline. Reading between the lines of Liu’s diplomatic answer, if the CHIPS Act subsidies do not come through as promised, TSMC doesn’t plan to put its best technology and capability in the second fab. And it is in no hurry to complete it until all the pieces are figured out to make sure this second fab will be a profitable one. If that does not happen until 2028, that is also about the time the CHIPS Act program expires (it is a five-year program).
What a shame, and fail, that would be.
Whether it is the first half of 2025 or some time between 2027 to 2028, Mark Liu will not see the fruit of either of the Arizona fabs; he is scheduled to officially retire this summer when TSMC’s shareholders meeting will take place to elect the company’s next chair. One might think that he would want to witness this project – this dream – somewhat fulfilled, if the timeline is to stick around for another 18 months or so. Alas, even with the high-profile honor of introducing President Biden at the fab’s tool-in ceremony a year ago and guaranteed accolades when the first fab finally reaches volume production, it was not enough for Liu to stay. He likely did not imagine dealing with Commerce Department bureaucrats as how he would close out his illustrious 30-year career at TSMC.
The thing is, of all the incredible difficulties and complexities that go into setting up a new advanced chips fab in America, receiving the CHIP Act subsidies was supposed to be the easy part. During the same tool-in ceremony, TSMC’s founder, Morris Chang, gave a short but sobering speech, where he talked about the death of globalization and recounted all the challenges he encountered when trying to set up TSMC’s first US fab in Camas, Washington in 1995. Chang was more hopeful of Arizona’s success rate in no small part because TSMC could count on support from US governments of all levels – federal, state, local – which he didn’t have 27 years ago.
That hope now looks foolishly misplaced. Meanwhile, Taiwan passed its own version of the CHIPS Act in early 2023 that is just as generous as the American one, if not more. More recently, South Korea announced a whopping $471 billion investment plan for the next 25 years to boost Samsung and SK Hynix to make South Korea the center of advanced chip making for the world. TSMC revealed in its earnings call that it is also having productive discussions with the Japanese government to receive support to build more advanced fabs there.
So it’s not like the few billions we’ve allocated is the only game in town; not even close! TSMC’s hedge is the first noticeable sign from a major industry player to signal that the CHIPS Act may not be what it is all cracked up to be. It won’t be the last, if America keeps dragging its feet.
备受美国政界赞赏的《芯片法案》(CHIPS Act) 进展并不顺利。作为该法案最大可能的受益者之一，台积电，看似已经开始对法案实施失败的可能进行规避。
自从16个月前该法案通过以来，由美国商务部领头的落实工作几乎没有对恢复美国在半导体制造领域的领先地位做出什么贡献。在补贴和支持先进芯片制造厂方面，该计划到目前为止只做出了两项相对无关紧要的补贴拨款 —— 给BAE公司的三千五百万美元，给微芯科技的一亿六千两百万美元 —— 这两家公司的项目都是用来生产成熟的（也就是旧的，非先进的）芯片，这些芯片在国防和军用产业中普遍使用。
支持国防承包商和供应国防工业的公司当然没有什么问题；把美国军队所依赖的芯片生产本土化是加强国家安全的重要一步。然而，如果通过《芯片法案》的初衷是要把先进的芯片制造晶圆厂公司 —— 台积电、英特尔、三星 —— 更好的在美国本土化，何况这几家公司也都在默认会获得大量政府补贴的前提下被诱惑，开始在美国投资建厂，那这款工业计划目前根本没有达到其目标。
无论是2025年上半年还是2027年至2028年之间的某个时刻，刘德音都不会看到亚利桑那工厂的产出的果实；他计划在今年夏天正式退休，届时台积电的股东大会将选出公司的下一任董事长。旁观者可能会认为，再坚持一下，再待18个月左右，不就可以亲眼见证这一宏伟项目 —— 这个梦想 —— 的结果了吗？然而，即使在一年前的工厂开工仪式上高调与拜登总统同台，在庆祝第一家工厂最终实现量产时的荣耀和光环，这些都不足以刘德音多留下一天。在台积电30年的辉煌职业生涯即将结束时，他可能万万没有想到要与美国商务部的官僚讨价还价。