Market observers view TSMC's overseas expansion strategy with skepticism, which also presents some opportunities for the pure-play foundry. Despite the fact that its wholly owned new fab in the US may be challenging to earn, TSMC should be able to keep its new JV fabs in Japan and Germany profitable, according to industry sources.
The market remains wary of TSMC's overseas fab expansions despite the company's recent announcement to construct a 12-inch wafer fab in Germany. Under the burden of having to diversify its manufacturing operations, the world's largest contract chipmaker can only do its best to pursue the path with the lowest risk, expense, and probability of loss, the sources indicated.
TSMC's plans to build wafer fabs in the US, Japan, and Germany each present risks and opportunities, the sources said. Joint-venture (JV) fabs in Japan and Germany should at a minimum maintain profitability according to TSMC's bottom line, which includes acquiring considerable government subsidies, distributing operating risks to JV partners, and sustaining long-term partnerships with local key automakers and IDMs.
In contrast, TSMC's advanced chips plant in Arizona may end up losing money, the sources continued.
The construction of TSMC's Kumamoto factory in Japan is currently proceeding efficiently, and the foundry has a firm grasp on profitability. It also collaborates with Sony and Denso to mitigate operational risks and acquire orders from the two major automotive IC and component suppliers, the sources said.
As a consequence of the Japanese government's decision to subsidize TSMC's Kumamoto JV fab, a cluster of local and international semiconductor companies is forming around the fab, the sources indicated. Kyushu may become Japan's "Silicon Island," allowing the country to gradually regain its global leadership position in semiconductor technology and manufacturing.
TSMC's planned fab site in Dresden, Germany will follow a similar concept to its present fab project in Japan, according to the sources. The pure-play foundry will team up with Bosch, Infineon and NXP to establish a 12-inch JV foundry called ESMC, which will be dedicated to making automotive and industrial ICs.
TSMC should be able to mitigate some operational risks at the Dresden site by securing government commitments to fund more than half of the total fab investments and by implementing a JV model. Despite robust labor unions, disparities in talent, and high operating costs such as hydroelectric, TSMC's JV partners should make every effort to overcome all of these obstacles, the sources noted.
Even though ESMC faces many challenges, the opportunities that lay ahead should not be disregarded, the sources said. With ESMC's emphasis on the long-term potential of the automotive market, TSMC may find success, according to the sources.
Article translated by Jessie Shen
