On May 20, the first stop of US President Biden's three-day trip to Asia chose the Samsung semiconductor factory located in Pyeongtaek, Gyeonggi-do, South Korea. Biden said in a speech after the tour, "Thanks to Samsung's $17 billion investment, the United States will build a factory like this in Texas, creating 3,000 high-paying jobs."

In March 2020, the global pandemic of the new coronavirus detonated a supply chain crisis in the global manufacturing industry, in which a serious shortage of semiconductors used in mobile phones, computers and electric vehicles caused a large-scale shutdown of manufacturing companies. About 169 industries are affected by semiconductor shortages, according to investment bank Goldman Sachs.

As a result, semiconductor supply has been included in the national security vision of major European and American countries. The United States, Spain and other countries have successively announced that they will invest heavily in semiconductor manufacturing. Since taking office, the Biden administration has continuously urged Congress to pass bills and budgets to support the return of semiconductor manufacturing to the United States, but Congress has so far failed to reach a consensus.

For semiconductor manufacturing, exactly how the business prospects of manufacturing in the U.S. are at the center of an industry debate. Zhang Zhongmou, the founder of TSMC, which has transformed the semiconductor industry through foundry manufacturing, pointed out in an interview in April that TSMC decided to invest $12 billion to build a 5-nanometer wafer factory in Phoenix, Arizona, "at the instigation of the U.S. government." However, in his view, "this will be a very expensive and futile move."

The establishment of factories in the United States by major semiconductor companies can indeed allow the United States to increase local manufacturing, "but it will be very expensive and not competitive in the global market." Zhang Zhongmou explained that although the United States is willing to provide tens of billions of dollars in subsidies, "but I I don't think that's enough."

Semiconductor industry analyst Dan Nystedt pointed out to the Caijing reporter that Zhang Zhongmou believes that from the perspective of industrial structure, the United States is already at the top of the semiconductor industry chain, not only maintaining a leading position in semiconductor design, but also in semiconductor manufacturing. Machine production and electronic automation design software are also dominant, so there is no need to go back and pursue manufacturing-side capacity at 50% higher manufacturing costs than Taiwan.

Global core shortage

In March 2020, the global economy was hit by the epidemic. Under the assumption that the epidemic will cause a contraction in consumption, many manufacturing companies listed reducing spare parts inventories as their main task. Customers' expectations have been lowered, and semiconductor manufacturing companies have also lowered their production capacity to a low point.

However, the large-scale closure of cities in Europe and the United States in 2020 has caused consumers to urgently purchase consumer electronic products such as home computers, TVs and tablets due to home office and entertainment needs. Coupled with school closures, the demand for game equipment among young people has also risen instantly. . Even more beyond market expectations, the auto industry that stopped production at the beginning of the epidemic also faced strong demand unexpectedly because the American people avoided taking public transportation, Uber, etc. due to epidemic prevention considerations. The supply of new cars in the United States was seriously in short supply. grow rapidly.

The demand for semiconductors in consumer electronics and automobiles has unexpectedly formed a competitive relationship under the lack of supply. For semiconductor foundries such as TSMC, because the revenue of automotive semiconductors accounts for a small proportion, urgent needs are easily ignored.

Over the years, mobile phones and game platforms have contributed 50% of TSMC's revenue due to their quantitative advantages, while automotive semiconductors have never contributed more than 5% of revenue. Taking 2019 as an example, the global market produced 1.4 billion mobile phones, but only 93 million vehicles were manufactured; from the perspective of profit and operation, semiconductor foundries chose to supply consumer electronics manufacturers first, such as mobile phones and computers. and game consoles, etc.

The reason why automotive semiconductors are relatively ignored by foundries is the industrial structure problem that has existed for many years. Generally, a car needs 1,000 chips, and an electric vehicle needs 2,000-3,000 chips. With the improvement of automobile automation, the number of chips used will continue to increase. The automotive semiconductor industry has been dominated by five European and American companies for many years, including Infineon, NXP, Renesas, Texas Instruments, and STMicroelectronics. When the market is stable, these companies usually outsource 20 to 30% of their production to generation companies like TSMC. industrial companies, but also prioritized cutting these outsourcing orders when auto demand weakened.

In 2020, automotive semiconductor companies will also operate as usual, but consumer electronics products are already in strong demand at that time. OEMs remind automotive semiconductor companies that if orders are cancelled or reduced due to the epidemic, OEMs will transfer production capacity to other products. The capacity for automotive semiconductors will be gone forever.

It is precisely because of such industrial structure problems that automotive semiconductors have been severely out of stock since the second half of 2020, resulting in the forced shutdown of some production capacity in the automotive manufacturing industry. In April 2021, the German Minister of Commerce even turned to Taiwan for help for the country's auto industry.

Since the Biden administration took office in early 2021, it has continuously sought to solve the problems of supply chain security and semiconductor shortages. The US Department of Commerce will conduct a large-scale questionnaire survey of semiconductor manufacturers and customers in September 2021, seeking to improve the relationship between supply and demand. In the end, the Commerce Department concluded that the solution should start with "making more semiconductors in the United States." Only 12% of the world's semiconductors are currently produced in the United States.

U.S. manufacturing relocation dilemma

Considering the serious shortage of global semiconductors, major semiconductor companies have announced investments to expand production capacity. TSMC announced in April 2021 that it would invest US$100 billion to expand its factory capacity within three years, South Korea’s Samsung Semiconductor announced in October 2021 that it would triple its foundry capacity by 2026, and the third generation in March 2021. Factory GlobalFoundries announced a $1.4 billion investment to increase production capacity at factories in the United States, Singapore and Germany.

Thomas Caulfield, CEO of GlobalFoundries, said that before the epidemic, the chip industry was expected to grow by 5% in five years, but after the epidemic, there was a clear acceleration trend, with an increase of 10%. He estimates that in the next 8-10 years, the production capacity of the entire industry needs to be doubled to meet market demand.

Stimulated by the policies of the Biden administration, Samsung announced an investment of $17 billion in Texas, Texas Instruments invested $30 billion, and memory chip company Micron also announced that it would expand its production capacity in the United States. However, it is not easy to produce price-competitive semiconductors in the United States. In the past few decades, the original complete semiconductor industry chain and talents in the United States have largely disappeared.

For security reasons, the U.S. Department of Defense has invited TSMC to set up factories in the United States since 2019, but TSMC has been stagnant due to cost factors. It was not until 2020 that it announced the establishment of a factory in Phoenix, Arizona, and then in June 2021, TSMC President Wei Zhejia It was confirmed that construction on a $12 billion plant in Arizona has started, and it is expected to start producing 5-nanometer chips in 2024, mainly for artificial intelligence equipment for U.S. cars.

Setting up a factory in the United States is an unforgettable memory for Zhang Zhongmou, who has worked at Texas Instruments for 25 years. He introduced that after TSMC set up a factory in Washington State in 1997, "all kinds of tragic accidents occurred." It was originally expected that the cost would be similar to that of production in Taiwan, China, but the results showed that the assumption at that time was "too naive." He pointed out that since the establishment of the factory, various managers and engineers have been sent from Taiwan, China to try to improve the production situation. After many attempts, the problem was finally solved, but the cost is still too high - the same product is more than that made in Taiwan, China. out 50%. Although the product is still profitable, it is far less profitable than making it in Taiwan.

Micron, which has been maintaining the production of some products in the United States, also confirmed that domestic manufacturing in the United States is 35%-45% more than in other countries that already have a complete manufacturing ecosystem.

Not only cost, but also a shortage of manufacturing talent and cultural issues are obstacles to American manufacturing. Zhang Zhongmou pointed out that the cheap land and electricity rates in the United States are quite advantageous, but finding competitive technicians and workers in Arizona will be a challenge, after all, manufacturing jobs are not popular in the United States.

Not only that, he also pessimistically pointed out that sending management from Taiwan, China to the US factory would not help. "Computers of different brands can be used together, but people of different cultures cannot be put together and run together." Taiwan, China of management can deliver the best results, but it doesn't mean they can deliver similar results overseas.

In early 2022, it was reported that the construction of TSMC's factory in Phoenix was delayed due to a shortage of workers, and then TSMC, which began to recruit engineers, had a cultural conflict with local manufacturing talents in the United States. TSMC required engineers to work 12 hours and needed to be on call at any time on weekends, allowing American engineers to work. Considered "military management", it is difficult to find a balance between work and life. According to media reports, in order to solve the talent shortage, TSMC is currently recruiting engineers in the United States and Taiwan, China.

In fact, although the United States has tried to relocate manufacturing to the United States since the Trump administration, after decades of relocating manufacturing, the United States faces a serious shortage of technicians and engineers. Jeannine Kunz, vice president of Tooling U-SME, who assists companies in recruiting talents, pointed out that the shortage of manufacturing talents in the United States is a "national disaster", and many companies are forced to refuse orders because they cannot recruit people.

Harry Moser, chairman of the non-profit organization "Reshoring Initiative" Foundation, told Caijing reporters that the United States is indeed facing a manufacturing talent crisis, but this can be alleviated by attracting foreign talents, while at the same time in semiconductor factories The establishment of training bases nearby, and the “high salary” of semiconductor factories are attractive enough to some young people, especially the decline in college enrollment in recent years, which will help manufacturing talents, because these people always need Finding a career worth pursuing, he believes these semiconductor factories will eventually recruit enough technicians and engineers.

A completely different view from Zhang Zhongmou is Intel's third president, Gersinger, who took office in early 2021. After taking office, he is determined to catch up with the times with Intel, which has missed several rounds of product battles, and simultaneously strengthen and integrate Intel's foundry and chip design businesses.

Gelsinger, who admits that American manufacturing is uncompetitive, chooses "safety" as his appeal. He came to power amid the global semiconductor shortage crisis and proposed that "the world needs a stronger, more geopolitically diverse semiconductor supply chain." Subsequently, Geersinger announced an investment of $20 billion to build a new factory in Ohio and expanded Capacity in Oregon, Arizona and New Mexico. In addition, he announced the establishment of new factories and R&D centers in Germany, Italy, Spain and Ireland.

Geelsinger further pointed out to the media when he participated in the Davos Forum at the end of May that global semiconductor manufacturing cannot be separated from its dependence on Asia, but the current state of 80% manufacturing in Asia and 20% in Europe and the United States is too imbalanced. He believes that a strategically balanced supply chain should be 50% in Asia, 30% in Europe, and 20% in the United States. "If we switch to 50% to 50% by 2030, then the goal will be achieved."

Wall Street investors remain skeptical of Intel's plans, arguing that investing in U.S. manufacturing is both challenging and long-term.