TSMC just held its earnings call for the first quarter of 2024, and its executives didn't mince words about the high costs associated with its expansion plans, both in the US and abroad. On the call, its chief executive stated that chips made outside of Taiwan will be more expensive due to various factors and that it expects its customers to help the company cover these additional costs. After all, says TSMC, it's the customers who wanted TSMC to be in these locations in the first place.
On the call, the company's CEO, C.C. Wei, stated that TSMC needs to have a global footprint to meet the demands of its US customers, which are now expanding into AI like never before. That list of customers includes big names like Intel, Nvidia, and AMD, along with its biggest overall customer, Apple. However, Wei said, these overseas fabs are not cheap, as electricity and inflation have severely impacted their expansion costs. When asked what kind of price hike US customers could expect given these factors, Wei demurred by saying pricing is confidential but that he expects its customers to pay extra for US-made chips.
In the transcript from the Motley Fool, Wei said, "We expect our customers to share some of the higher cost with us, and we already started our discussion with our customers. And as I said, for the overseas fab, we want to share our value, which also includes the flexibility of geopolitical location or something like that. If my customer requests to be in some certain area, then definitely, TSMC and the customer had to share the incremental cost."
Reading between the lines, it sounds like Apple specifically asked TSMC to set up shop in the US so that it could claim it's using "US-made" silicon, which has been previously reported. However, it remains to be seen what the "incremental cost" will be and whether customers of Apple, Intel, Nvidia, and others will want to pay more as well. The analyst on the call suggested the increase might be as high as 5% to 10%, but TSMC wouldn't go into specifics. Previous reports have pegged the number as high as 30% for chips made in Arizona.
We will soon find out what those costs are, though. On the call, it was stated that TSMC has begun the initial production of 4nm chips at its Arizona facility, with volume production starting in 2025. In the future, Mr. Wei said he expects 3nm production in Arizona to begin by 2028 and 2nm production to be up and running by 2030.
