Thursday, February 9, 2023
HomeMarketTSMC Makes a $40 Billion Bet on U.S.-Made Chips. Don’t Declare Victory...

TSMC Makes a $40 Billion Bet on U.S.-Made Chips. Don’t Declare Victory Yet.

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This past Tuesday,
Taiwan Semiconductor Manufacturing
announced that it would expand its investments in Arizona to more than $40 billion—from its initial $12 billion commitment. TSMC’s first Arizona fab will begin making 4-nanometer chips in 2024, and a second will produce 3-nanometer chips by 2026. Smaller chips normally are faster and more power-efficient than larger ones.

Forty billion is a big number, but it’s not a panacea. TSMC didn’t lay out a time frame to spend the money. And it will be a fraction of TSMC’s overall capital spending, which
J.P. Morgan
estimates at $100 billion from 2022 to 2024. The fabs will add to U.S. capacity, but with limitations. Taiwan has become a geopolitical flashpoint with China and the U.S. because it accounts for more than 90% of the world’s most advanced chip manufacturing, notes a 2021 report from the Semiconductor Industry Association and Boston Consulting Group. Most of that comes from TSMC.

By the time the Arizona plants go on line, they’ll be one or two generations behind Taiwan’s most advanced fabs. J.P. Morgan expects TSMC’s Taiwan plants to start making 3-nanometer chips in 2023’s first quarter; by 2026, they are likely to have moved on to something better. By then, chips for the latest
Apple
iPhone won’t be U.S.-made because they’ll require the most advanced technology. The Arizona fabs will likely support older iPhones or iPads.

Last month, Tufts’ Chris Miller, author of Chip War, told Barron’s that U.S. policy makers were still underestimating the risks around Taiwan, should the geopolitics deteriorate. While $40 billion may relieve political pressures, advanced chip-making will remain concentrated in Taiwan.

Next Week

Monday 12/12


Oracle
reports earnings
for its fiscal second quarter. Analysts are looking for $1.17 per share, down from $1.21 a year ago.

Tuesday 12/13

Photronics,

ABM Industries,
Transcontinental, and
PHX Minerals
announce quarterly financial results.

The House Financial Services Committee meets for an initial hearing investigating the collapse of FTX, the cryptocurrency exchange. FTX founder Sam Bankman-Fried recently told The Wall Street Journal that he couldn’t explain what happened to billions of dollars that FTX customers sent to the bank accounts of his trading firm, Alameda Research.

The Bureau of Labor Statistics releases the consumer price index for November. Economists forecast that the CPI will show an increase of 7.3%, year over year, following a 7.7% jump in October. The core CPI, which excludes volatile food and energy prices, is expected to be up 6.1%, compared with 6.3% in October.

Wednesday 12/14

The Federal Open Market Committee concludes its final two-day meeting of the year. “The time for moderating the pace of rate increases may come as soon as the December meeting,” Chairman Jerome Powell recently said.

Lennar,

Nordson,
and Trip.com report quarterly results.

The Bureau of Labor Statistics releases its Export Price index, which is believed to have fallen 0.85% in November, after a 0.3% drop in October. Import prices are expected to be down 0.6%, after a 0.2% dip in October.

Thursday 12/15

Adobe
and
Jabil
host earnings conference calls.

The European Central Bank begins its two-day policy meeting in Frankfurt.

The Philadelphia Fed Index, a monthly measure of manufacturing activity, is released. Economists expect a negative 11.5 reading for December, compared with a negative 19.4 in November.

The Census Bureau reports retail sales data for November. The consensus call is for consumer spending to be flat, month over month, while sales excluding autos are seen gaining 0.3%. Both figures rose 1.3% in October.

The Federal Reserve releases November industrial production figures, which measure the output of factories, mines, and utilities. Expect a 0.10% seasonally adjusted rise, after a 0.10% drop in October. Manufacturing production is expected to be up 0.15%, in line with October’s increase. Capacity utilization is expected to be 79.8%, compared with 79.9% in October.

Friday 12/16

Winnebago Industries,

Darden Restaurants,
and
Accenture
host earnings conference calls.

Write to Tae Kim at tae.kim@barrons.com

Credit: marketwatch.com

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