TSMC, which is under pressure from major countries to set up factories overseas, has been criticized for receiving subsidies from the US and Germany by Intel and GlobalFoundries respectively. What is noteworthy is that TSMC's investments in Kumamoto, Japan and the related subsidies received from the Japanese government have been smooth and without controversy so far, and their cooperation is pleasant.
Several Taiwanese equipment industry experts told DIGITIMES that, compared with the United States and Germany, TSMC's investment in Japan is more out of its own will. TSMC is quite aware of its biggest weakness in semiconductor equipment and materials, which are dominated by European, American, and Japanese companies. After a thorough assessment, TSMC's decision to work closely with Japanese partners also has motivated positive and active participation from the Japanese side.
For Japan, joining hands with TSMC is a significant boost. According to the latest semiconductor strategy report released by Japan's Ministry of Trade, Economic and Industry, after the establishment of the joint venture between TSMC and Sony, more than 10 local semiconductor-related companies have announced plans to expand their capital expenditures, including the Tokyo-based semiconductor equipment firm Tokyo Electron Limited (TEL), Ebara precision, Sumco, etc.
TSMC has also made it clear that overseas decisions are based on customer demand and the level of government support. The reasons for higher start-up costs for overseas fabs include smaller fab sizes, higher costs for the overall supply chain, and the lack of mature overseas ecosystems, compared to the mature semiconductor ecosystem in Taiwan.
In recent meetings with the US, Japanese, and European governments, all parties understand the integral role TSMC plays in the semiconductor industry, and TSMC is grateful for the support and cooperation of all governments in helping to close the cost gap. In addition, TSMC's pricing will remain strategic to reflect value, including the value of geographic flexibility, while continuing to reduce costs by capitalizing on competitive advantages such as manufacturing technology leadership, mass production, and economies of scale.
However, Intel and GF have also expressed their dissatisfaction over the subsidies offered by the European and American governments to invite TSMC. Among them, GF bluntly said that Germany's subsidization of TSMC will distort market competition and bring risks such as relying on a single supplier.
In fact, TSMC did not want to produce chips in Europe and the US in the first place due to the high cost and cultural differences. So far it has not finalized its investment plan in Germany, and the Arizona fab is running into various problems that forced it to confirm that mass production in that fab will be delayed until 2025.
TSMC's Japan investment proved a win-win
The highly efficient Japanese government is a clear contrast. It has quickly approved the joint venture of TSMC, Sony, and others. The first 12-inch wafer fab will use 12/16nm and 22/28nm process technologies and is expected to be in mass production in December 2024, while the second factory is also under evaluation.
As for the decision to expand production in Japan, TSMC CEO C. C. Wei said earlier that the main reason is that the largest customer Apple has requested that TSMC provide full support to Apple's largest supplier (Sony), and that TSMC's core consideration has always been to prioritize the needs of its customers.
"If our customer's products are not sold, TSMC will not be able to get orders, and therefore it must give full support to the customer," according to C.C. Wei.
TSMC's investment in Kumamoto is revitalizing semiconductor-related investments in other prefectures of Japan as well, including Nagasaki and Fukuoka. It is estimated that in Kumamoto alone, semiconductor investments are creating more than 7,000 new job openings, of which about 1,000 are directly employed by JASM (the joint venture of TSMC and Sony). JASM directly employs about 1,700 people in total. In terms of the salary level, TSMC's basic monthly salary is JPY280k for university graduates, JPY320k for master's graduates, and JPY36k for doctoral graduates, which is JPY50k higher than the national average for the industry in Japan.
The semiconductor equipment industry believes that the biggest reason behind TSMC's close relationship with Japan is that it knows exactly where its own weaknesses lie. For TSMC, there is no problem with its technological strength, but the strength of its equipment and materials supply chain is far less than that of European, American, and Japanese companies.
If TSMC is not the largest customer of those equipment and materials suppliers, it will not get an advantage in the bargaining process for supplies. So more than three years ago TSMC decided to tighten the symbiotic relationship with Japan, to enhance the material research and development capabilities and ensure the supply of production capacity.
According to the strategy report published by the Japanese government, the largest global market share of semiconductor manufacturing equipment goes to US companies, led by Applied Materials, accounting for 35% of the total; followed by Japan's 31%, EMEA's 22%, China's 9%. Taiwan only got 1%.
And for semiconductor materials including silicon wafers, anticorrosive agents, CMP, photomasks, etc., Japan accounted for 48%, Taiwan 16%, South Korea 13%, EMEA 10%, the United States 9%, China 3%. In the photoresist fluid or hydrogen-fluoride (used for cleaning wafers) market, Japan enjoys an oligopoly position.
