Taiwan chip pioneer warns US plans will boost costs

TAIPEI, Taiwan (AP) — U.S. government efforts to shift production of processor chips from Asia to the United States will double their cost and slow the spread of their use in phones, cars and other products, the billionaire founder of the global industry’s biggest manufacturer warned Thursday.

Morris Chang of Taiwan Semiconductor Manufacturing Corp. said he supports U.S. efforts to slow China’s development of chip technology on security grounds. But Chang said he can’t understand why Washington wants to move so much manufacturing from efficient Asian sites to the United States.

The Biden administration is promising tens of billions of dollars to support construction of U.S. chip foundries and reduce reliance on Asian suppliers, which Washington sees as a security weakness. TSMC is building an Arizona facility and plans a second for a total investment of $40 billion.

TSMC has estimated chip costs in Arizona at 50% above its flagship production line in Taiwan, but the real level looks closer to double, said Chang. The veteran of Texas Instruments Inc. founded the company in 1987 and was its chairman until 2018.

“Maybe it’s double the cost,” Chang said. “When the cost goes up, the pervasiveness of chips will either stop or slow down considerably.”

TSMC said in 2021 that it planned to invest $100 billion over three years in expanding its manufacturing capacity and supporting research and development. It also is building a $7 billion computer chip plant in southern Japan with Japanese entertainment and electronics giant Sony Corp.

Chang, 91, is regarded as the founder of the semiconductor industry that made Taiwan, with 22 million people, a global tech center.

Processor chips are a sore point in U.S.-Chinese relations that increasingly are strained by conflicts over security, technology, human rights and territorial disputes.

China’s ruling Communist Party is spending billions of dollars to develop its own chip vendors and reduce reliance on imports. Washington has tried to slow that by restricting access to chips, manufacturing equipment and design technology on security grounds.

U.S. unease about relying on Asian chip suppliers has increased as the government of Chinese President Xi Jinping stepped up efforts to intimidate Taiwan, which Beijing claims as part of its territory.

The self-ruled island democracy split with the mainland in 1949 and never has been part of the People’s Republic of China. Beijing says Taiwan is obliged to unite with the mainland, by force if necessary. Xi’s government has flown fighter planes and fired missiles into the sea near the island.

U.S. policy is “to slow down China’s progress in chips,” Chang said. “I really have no quarrel with that. In fact, I might say, I support it.”

However, Chang said he didn’t understand why Washington wants to move so much manufacturing from Taiwan to the United States. He said U.S. officials don’t see Taiwan as a site for “friend shoring,” or using manufacturing in allied countries to reduce exposure to global supply risks.

The United States accounts for about 11% of global chip manufacturing, according to Chang. He said that should be more than enough for military needs.

“If it’s just for national security, it doesn’t have to be that high,” Chang said. “National security, defense (need) maybe only a couple of percent of chip manufacturing.”

TSMC was the first foundry to produce chips only for customers without designing its own. That allowed smaller designers to compete with industry giants without spending billions of dollars to build a factory.

TSMC has grown into the biggest chip producer, supplying Apple Inc., Qualcomm Inc. and other customers. TSMC-produced chips are in millions of smartphones, automobiles and high-end computers.

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AP Business Writer Joe McDonald in Beijing contributed.