Samsung Electronics and Taiwan Semiconductor Manufacturing Company (TSMC) are prioritizing domestic locations for their most advanced semiconductor plants, despite expanding investments in the US, Japan, and other countries.
Samsung, a prominent global chip maker, has committed to investing 500 trillion South Korean won (approximately US$371 billion) by 2047 in a "mega-cluster" semiconductor project located south of Seoul. This facility will focus on producing advanced products, including chips manufactured using the 2-nanometer process. Similarly, TSMC announced plans to build fabrication plants for 2-nanometer chips in science parks in Taiwan's Hsinchu and Kaohsiung cities, with additional efforts to secure approval for another 2-nanometer fab in Taichung.
Both companies aim to commence mass production utilizing 2-nanometer process technology in 2025. They are also enhancing domestic investments as they grapple with challenges in building production bases in the US amidst initiatives to boost local chip manufacturing and counter China's ambitions for chip self-sufficiency.
Samsung and TSMC are anticipated to receive significant subsidies under the US Chips and Science Act, with both companies having construction projects in the US. TSMC is constructing two fabs in Arizona, initially aiming to start mass production of 4-nanometer products this year and 3-nanometer products by 2026. Samsung has been building a US$17 billion fab in Texas, set to produce 4-nanometer chips, though both companies have experienced production schedule delays.
Both companies have delayed their production schedules, with Samsung postponing mass production at its Texas fab to 2025 due to reported delays in the disbursement of US subsidies. TSMC has also pushed back production plans in Arizona to 2025 due to challenges in recruiting skilled local workers and facing resistance from local unions regarding the employment of workers from Taiwan.
Despite enticing incentives from other regions like Europe and Japan to establish local production of advanced chips, both Samsung and TSMC have refrained from moving their most cutting-edge manufacturing overseas due to cost-related factors. According to Eddie Han, research director of Taiwan-based Isaiah Research, the primary reason for this decision is the higher production costs in the US and other countries, making the construction and operation of factories in Taiwan significantly more cost-effective.
In addition to cost-efficiency, both companies are committed to increasing production at home to capitalize on a stable labor supply and the host governments' increased investments in the local chip sector amid geopolitical uncertainties.
South Korea aims to create the world's largest chip industry cluster, encompassing 13 new chip plants and three research facilities across northwestern Gyeonggi province. This ambitious project is expected to receive a substantial investment from SK Hynix, the second-largest chip maker in South Korea. The initiative is projected to achieve a monthly production capacity of 7.7 million wafers by 2030 and create at least 3 million quality jobs over the next 20 years, including 950,000 jobs in the next five years.
At the same time, concentrating more production at home could impose pressure on global supply chains, potentially leading to increased average costs within the supply chain and ultimately impacting electronic prices for end consumers, as highlighted by Isaiah Research's Han.
