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Comment by mmmBacon | Hacker News Reader

The article doesn’t say why the chips have a cost difference. The wafer cost of advanced nodes is ~$30k per wafer. Is the wafer cost different or is the yield different and hence the reason for the variance of 5-20%? All else being equal (same die size/design on same process) I suspect that a large part of the cost difference is yielded cost due to maturity of operations at the Arizona fab. Taiwan has had many years to optimize operations. You see this for any product initially when it moves to a new production site.

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We can speculate. But I bet the fact that the supply chains needed by a US plant stretch across the globe (mostly back to Taiwan, Japan, and Germany) has something to do with that. In Taiwan, supply chains are local. Things like wafers might not be produced in the US yet.

You can hop in a car and visit them. In the US they are across the Pacific and in a very different/inconvenient timezone. It's a 15 hour gap. 9 am in Arizona would be midnight in Taiwan. And there's the anti meridian running through that so it's a day later over there as well. And the business days barely overlap.

I bet all that adds some friction in day to day operations. Lost time, shipping delays, miscommunication, etc. There are solutions to this, of course. But I'm sure that adds complexity to an already complex business. So, limiting that overhead to just 5-20% sounds pretty good to me.

The supply chain is already dispersed, even outside Taiwan. Particularly as we move from single die devices to MCM, many processes are outside of Taiwan. JCET is in Singapore and Amkor is in Arizona and Korea for example. There is some cost to the logistics but it’s kind of in the noise on a per device basis. The cost is in the processes themselves. It is a gigantic pain to manage but it doesn’t not add such a high variable cost.

Semiconductor companies need gross margins of around 65% to grow and be able to invest in development of the next node. So this large additional variable cost really can’t be shrugged off as you suggest. If so, Ms. Su wouldn’t have mentioned it at all.

The article quotes the CEO saying yield is comparable:

>TSMC’s new Arizona plant is already comparable with those in Taiwan when it comes to the measure of yield — the amount of good chips a production run produces per batch — Su told the audience at the forum.

The overhead cost of a fab is fixed. So hard to understand why that would have such a wide variance. It may be true that the facility hasn’t been fully amortized so in principle it’s more expensive to make chips there. I can understand it being more expensive for many reasons. However I wouldn’t expect the cost difference to have a large variance. 5-20% is a very large range if the yields are comparable.

I would have to think personnel cost, no? I'm assuming American pay rates are higher than Taiwan's.

More cynically, perhaps the DoD is getting a sweetheart deal and TSMC is passing the cost onto customers.

They brought in a bunch of process engineers from Taiwan to set up thr same processes.

It's the limited and expensive talent pool, construction costs etc. resulting in a difference. Americans do earn at least 2-3x more than someone in Taiwan for a given role.

The 5-20% range likely reflects TSMC's yield learning curve in Arizona, with costs trending toward the lower end as the fab matures and defect densities approach those of Taiwan's established facilities.

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