When it comes to tech news, I try not to stray too far into political discussions since those can get unnecessarily charged. However, quite naturally, there are some aspects of the tech world that are very susceptible to political decisions. For instance, a push for more tech to be made on US soil is great, but it does have notable cost implications.
TSMC, a famously Taiwanese company (it's in the acronym), has set up a manufacturing plant in the United States, and a big reason for that is a push from US President Donald Trump to reduce dependence on overseas manufacturing. Unfortunately, chips made in TSMC's American plant are quite a bit more expensive than those it makes in Taiwan.
TSMC's American Chips Cost 20% More Than Their Taiwanese Counterparts
Recently, I wrote about how TSMC has started on its third manufacturing fab in the US state of Arizona. This plant is different from the others because it is intended to produce chips on a 2nm process, which would make the chips it produces very competitive. Generally speaking, it is a big win for the US to produce chips that it'll use in smartphones, computers, and for AI purposes.
However, there is one major downside to the chips that TSMC makes in the United States, and there are some pretty high-profile individuals complaining about it. One is Lisa Su, the CEO of AMD, one of TSMC's biggest customers. According to her, chips that TSMC makes in the US have a 20% higher price tag compared to the chips the company makes in Taiwan. That's enough of a price hike to discourage companies that need those chips.
However, it doesn't seem to be an issue, according to the CEO. She believes that even in the presence of these high prices, things aren't going to slow down at all. That's not much of a surprise, as we've seen how crazy the AI wave has been, and it certainly isn't slowing down.
Here's Why Chips Cost a Lot More to Make in the US Than in Taiwan
I hardly consider myself to be some kind of economic expert, but it isn't that hard to understand why chip costs are so much higher in the US. Let's break it down.
- The United States has a much higher cost of living than Taiwan.
- With a higher cost of living, the general population receives higher wages (equivalent in USD) than the general population in Taiwan.
- This means that TSMC factory workers in Arizona likely have a much higher payroll than in Taiwan.
- Higher employee wages are passed on to consumers or partner firms.
However, it isn't all about employee costs. Many of the materials used in chip manufacturing are imported from other countries. Import fees and tariffs add to the cost of parts and raw materials, and again, that cost has to be reflected in the final product, which ultimately means a final product that is a lot more expensive.
However, we'll wait to see whether Lisa Su's words are true. Will a 20% price hike be enough to scare people away from working with TSMC's US plant? We'll find out in due time.
