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Arizona expansion: TSMC promises the new plant will create more than 1600 jobs directly, plus “thousands of indirect jobs in the semiconductor ecosystem” In addition, amendments to the National


Defense Reauthorization Act, if adopted,would establish a new grant programmefor manufac- turing, research and development and pro- mote the semiconductor industry in the US. The state’s development agency, Arizona


Commerce Authority, refused to comment. “Typically, incentives have made up 10-15%


of the overall project budget in the US for semi- conductor foundries in general,” says Brett Simpson, co-founder and semiconductor equity analyst at London-based Arete Research. They are especially important to TSMC, which enjoys a 40% operating profit margin and has a busi- nessmodel that dictates a 20%returnon equity, he adds.


Lackof specifics Some sceptics wonder, however, whether the deal is TSMC’s way of placating the US govern- ment. The Taiwanese company has a similarly sized plant in China – the latter is building its own semiconductor industry from scratch. “The fact that there are no specifics about a site and the start date is so far out makes me think this is an announcement of a fab they hope they never have to actually build,” says Scotten W. Jones, president of cost modelling company IC Knowledge. Brian Matas, vice president for market


research at IC Insights in Scottsdale, Arizona, has similar doubts. He is adopting a “wait and see” approach. “If it does come to fruition, it will be a big deal,” he notes. But SEMI chief executive Ajit Manocha


thinks there’s a reason TSMC is starting small withthe Arizona fab. “I think they will go into a phased approach. They will add more capacity as demand dictates and as a function of time,” he said.


August/September 2020 www.fDiIntelligence.com Mr Manocha believes the industry incen-


tives created by the bills before Congress will put the US on a more level playing field with other countries that already subsidise their domestic semiconductor companies, including China and Taiwan. “The fundamentals of the industry here are very strong, andit will double in size and recover in the next 10 to 15 years. I think demand will dictate what TSMC and other companies do in the US,” Mr Manocha predicted.


Extra FDI? US secretary of state Mike Pompeo has touted the creation of highly skilled sub-industries or clusters around the new TSMC plant. But whether TSMC will attract additional FDI to Arizona has not been determined. Arizona already has the nucleus of a semi-


conductor industry – including an Intel plant – but Mr Matas at IC Insights notes that a lot of their suppliers are global in nature with head- quarters in South Korea, Japan and Europe. He does not expect a small plant like TSMC’s to attract many new suppliers. However, at least one company, Taiwan Specialty Chemicals Corp, has plans to build warehouse facilities nearby to support itsmajor client. With Intel and other fabs in the area, it


would make sense for TSMC to piggyback on the infrastructure that already exists, agreesMr Simpson at Arete Research. “There will be some infrastructure investment from overseas, but they will also leverage what is already there. That’s typically why you build fabs in clusters: to reduce costs by having engineers on site.” Two things are clear. Arizona now has a


stronger foothold on the global semiconductor map; and competition between the US and China is getting even hotter.■


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