[News] TSMC and PSMC Face Dilemma as Overseas Foundry Costs Skyrocket 2.5 to 4 Times

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Various countries are actively developing their semiconductor industries, with Taiwan’s semiconductor foundries, including TSMC, UMC, and PSMC, becoming prime targets for local manufacturing facilities. TSMC has established plants in the United States, Germany, and Japan, while PSMC, in addition to its facility in Miyagi-ken, Japan, has recently announced plans to assist India in building a factory.

However, for these Taiwanese semiconductor foundries, expanding overseas may not always prove to be a economical choice.

According to Taiwan’s Economic Daily News, PSMC Chairman Frank Huang revealed that 7 to 8 countries have invited the company to establish manufacturing facilities in their respective regions. However, the costs in these countries are higher than those in Taiwan.

Huang pointed out that, based on the data they have, the cost of building a fab in Japan is 1.5 times higher than in Taiwan, with construction costs being 2.5 times higher and operational costs 50% more expensive than in Taiwan. It would take 7 to 8 years for the combined construction and operation to become profitable, meaning the factory would only start making money three years after its establishment. In contrast, PSMC’s Fab P5 in Tongluo Science Park is expected to break even this year.

PSMC had already disclosed plans to assist India in technology transfer for building a fab in early 2023. Huang explained that because South Korea and the United States are unwilling to teach others how to make semiconductors, neither TSMC nor UMC are offering such assistance, leaving PSMC as the go-to option for those seeking guidance in semiconductor manufacturing.

The countries reported to have sought PSMC’s assistance in building fab include Japan, Vietnam, Thailand, India, Saudi Arabia, France, Poland, and Lithuania.
According to TrendForce research, PSMC is the third-largest semiconductor foundry in Taiwan and ranks 10th globally. It announced its investment in a 12-inch factory in Miyagi-ken, Japan, at the end of 2023.

Similarly, TSMC, the leading foundry based in Taiwan, faces similar challenges when expanding overseas. In early 2023, TSMC executives stated during an earnings conference that due to factors such as labor costs, permits, regulatory compliance, and rising living prices, the cost of setting up a plant in the United States is at least four times higher than in Taiwan.

However, beneath the economic considerations, geopolitical factors play a significant role in these decisions. The ongoing regional shift in the semiconductor industry supply chain is inevitable in the current geopolitical climate.

(Image: PSMC)