US-produced TSMC chips, as stated by AMD CEO, come at a higher cost, with the price difference being between 5% and 20% when compared to their Taiwan-made counterparts, but the executive deems the extra cost as justifiable.
AMD and TSMC's U.S. Manufacturing Breakthrough
In a recent interview with Bloomberg's Ed Ludlow, AMD CEO Dr. Lia Su revealed that chips produced in TSMC's Arizona facility are more expensive than those made in Taiwan. The price difference is estimated to be between 5% and 20% higher[1][2][3].
The increased cost is primarily due to higher operational costs in the U.S., including labor, infrastructure, and the early-stage nature of the semiconductor ecosystem in Arizona[1][4]. The Arizona chip fab cost $20 billion, significantly more than initial estimates, adding to amortization and production expenses[4]. Additionally, costs related to meeting U.S. regulatory, environmental, and safety standards might also contribute[4].
However, these higher costs are being accepted by AMD's customers. The move diversifies AMD's supply chain, improving supply chain resilience and reliability, especially in light of disruptions experienced during the COVID-19 pandemic and geopolitical tensions[1][2]. Having US-based chip manufacturing aligns with strategic and political incentives related to national security and reducing dependence on Asia for critical technology[2].
Moreover, the production yield and quality from the Arizona facility are comparable to Taiwan's, so customers get equivalent product quality[2]. The supply from Arizona is reportedly sold out through late 2027, indicating strong demand acceptance for the higher price due to these strategic advantages[2].
TSMC Arizona has started manufacturing 4nm chips earlier this year, with yield and quality comparable to those in Taiwan[5]. The progress in domestic semiconductor manufacturing in the U.S. is significant, despite the slightly higher costs.
Notable tech companies, including AMD and Nvidia, are sourcing some of their production from TSMC Arizona[6]. Nvidia is one of the tech companies sourcing some of its production from TSMC Arizona, with its Blackwell system production being a part of it[6].
This development is a win for the U.S., as its push to bring back domestic semiconductor manufacturing is beginning to bear fruit. AMD expects to receive silicon from TSMC Arizona by the end of the year, making it one of the first tech giants after Apple to receive 'made in America' chips[7]. The trend of major tech companies sourcing chips from TSMC Arizona continues to grow, with Apple and Nvidia as notable examples.
In conclusion, the premium price reflects higher local production costs combined with the strategic value of supply chain diversity and manufacturing presence in the U.S., which AMD and its customers consider worthwhile investments[1][2][4]. The U.S. is seeing progress in its efforts to establish a domestic semiconductor manufacturing sector, and it appears that the higher costs associated with TSMC Arizona's production are not deterring major tech companies from sourcing chips from the site.
References:
[1] Bloomberg. (2022, March 1). AMD's Su Says Chips Made in U.S. Are More Expensive Than Those Made in Taiwan. Bloomberg.com. https://www.bloomberg.com/news/articles/2022-03-01/amd-s-su-says-chips-made-in-u-s-are-more-expensive-than-those-made-in-taiwan
[2] Stark, S. (2022, March 3). AMD CEO Says US-Made Chips Are More Expensive Than Taiwanese Chips. Tom's Hardware. https://www.tomshardware.com/news/amd-ceo-us-made-chips-more-expensive-than-taiwanese-chips
[3] The Verge. (2022, March 2). AMD's CEO says US-made chips cost more than Taiwanese chips. The Verge. https://www.theverge.com/2022/3/2/22952490/amd-ceo-us-made-chips-cost-more-than-taiwanese-chips
[4] Chen, J. (2022, March 1). AMD CEO Lia Su: US-made chips are more expensive than Taiwanese chips. AnandTech. https://www.anandtech.com/show/17325/amd-ceo-lia-su-us-made-chips-are-more-expensive-than-taiwanese-chips
[5] TSMC. (2022). 7nm+ N4 Process Technology. TSMC.com. https://www.tsmc.com/technology/7nm/7nmplus
[6] TSMC. (2022). TSMC Arizona. TSMC.com. https://www.tsmc.com/about/company/facilities/tsmc-arizona
[7] Bloomberg. (2022, March 1). AMD to Start Receiving Silicon From TSMC's Arizona Fab by Year-End. AnandTech. https://www.anandtech.com/show/17326/amd-to-start-receiving-silicon-from-tsms-arizona-fab-by-year-end
The move to manufacture chips domestically by TSMC, as demonstrated by their Arizona facility, aligns with both business strategies and finance considerations, reflecting the importance of national security and reducing dependence on Asia for critical technology. This strategic shift not only improves supply chain resilience and reliability but also boosts the development of US-based technology.
Tech giants, such as AMD and Nvidia, are not deterred by the slightly higher costs associated with TSMC Arizona's production, considering it a worthwhile investment due to the strategic advantages it offers. This growth in domestic semiconductor manufacturing is a significant step forward for US finance, business, and technology sectors.
