Japan Emerges as the Most Favorable Location for TSMC’s Chip Production Localization

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Taiwanese semiconductor giant TSMC is currently expanding its contract chip manufacturing operations beyond its home turf, with a focus on three geographical directions: the United States, Germany, and Japan. Industry insiders and other sources note that Japan offers the most favorable conditions for TSMC across various criteria, which will expedite the realization of its local project in the western part of the country.

It’s worth recalling that as early as next year, TSMC is set to commence operations at the first of two possible facilities in Japan. This facility will cater to the interests of Sony and Denso, both of which are major shareholders in the joint venture, producing chips for them using rather mature lithographic processes exceeding 12 nm. The partners are expected to invest approximately $8.6 billion in the construction of the facility. Interestingly, they will receive unusually substantial government subsidies, totaling $3.23 billion, a significant sum by Japanese standards.

According to Reuters sources, TSMC is contemplating the construction of another chip manufacturing facility specializing in more advanced lithography on the western coast of Japan. The TSMC project in the U.S. state of Arizona has faced a shortage of qualified workers, delaying the production of N4 (4nm process) chips from 2024 to 2025. TSMC representatives have refrained from directly comparing their foreign projects, as they significantly differ in scale and parameters.

Experts note that Japan is favorable for TSMC due to the presence of many local equipment and materials suppliers, although the company will still need to source some from Taiwan. The proximity of the island to Japan simplifies collaboration in resolving various technical issues, as necessary specialists can arrive from Taiwan in just a few hours. Crucially, the corporate cultures of Japanese and Taiwanese companies are quite similar, with employees in both countries understanding the need for overtime work and strict adherence to schedules. In contrast, Germany, for example, has a workforce accustomed to longer breaks, with strong labor unions often advocating for their interests. In such an environment, experts believe it would be challenging for TSMC to develop its business. In Japan, TSMC is even willing to offer higher salaries (by national industry standards) to attract specialists to its new facility and secure their loyalty.

In the United States, the company has encountered high capital expenditures. Initially, it was thought that construction costs for the Arizona facility would be 20% higher than in Taiwan, but the reality has shown that they are approximately one and a half times higher. However, TSMC holds a dominant position in the contract chip manufacturing services market, allowing it to set pricing levels for its American customers that could, at least in part, cover the difference in the company’s localization expenses.

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Martin Harris
I'm Martin Harris, a tech writer with extensive experience, contributing to global publications. Trained in Computer Science, I merged my technical know-how with writing, becoming a technology journalist. I've covered diverse topics like AI and consumer electronics, contributing to top tech platforms. I participate in tech events for knowledge updating. Besides writing, I enjoy reading, photography, and aim to clarify technology's complexities to readers.

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