[sirius87]

Wonder if the Taiwanese govt at some point will step in and block these onshoring measures as a matter of national security.

If countries are less reliant on manufacturing within Taiwan, its one less reason to stand up to Beijing's one China principle.

[rjzzleep]

People who don't understand what OP just wrote should look at what just happened to the South Korean semiconductor market. over 36% plunge in exports[] and that samsungs memory profit dropped 95%[].

Yes, they depend on ASML, but ASML itself was dependent on IP from TSMC engineers. TSMC already announced that they will stop applying for subsidies from the Chip Act[] in the US recently because the US keeps changing what confidential data needs to be shared with the US.

They seem to be at least slowly understanding that this is a dangerous game.

And for the people that keep talking about ASML you might well want to remember that not long ago the leadership was mocking China's capability to build their own domenstic supply chain only to flipflop shortly after saying that it would be foolish to abandon the Chinese market likely indicating that they might be concerned that their domestic supply chain might end show up faster than expected.

Taiwanese media last year was plastered with news about how the US hollowed out the Japanese semiconductor industry with its agreement in 1986 and how that will be potentially the fate of Taiwan.

But the sibling comments are correct about the potential blowback, let's not forget that the US has been talking about bombing TSMC themselves[]. I guess that probably explains why they just announced a delay to the construction of the Arizona fab.

[] https://www.koreatechtoday.com/south-koreas-semiconductor-ex...

[] https://www.aljazeera.com/economy/2023/7/27/samsungs-profit-...

[] https://www.theregister.com/2023/04/11/tsmc_chips_act/

[] https://www.taiwannews.com.tw/en/news/4886681

[berkes]

> the leadership was mocking China's capability to build their own domenstic supply chain

Well, ASML is primarily and rightly very concerned that once "China" has their machines they'll attempt to reverse engineer them, ignore any western patents and IP and try to build 'Chinese chip machines'. It's happened to many industries, from Lego to fashion to hi tech. Hell, apparently there's even Chinese Knock-off Movies.

So, above everything else, there's a legitimate concern for ASML that once they move or deliver too much into China, they'll enable their own competition.

[dahwolf]

ASML's EUV machines cannot be reverse engineered.

There's over a 100K parts, several of them from exclusive suppliers. You'd have to recreate several industries from scratch or somehow bribe all suppliers. You will absolutely fail to recreate the parts at all but even then if you hypothetically would, you can't put the machine together as if it's just a few bolts. It requires a team in the know months to do it, but you're not in the know. The tolerance for error is near-zero. Installing, configuring, running the machine, both hardware and software is extraordinarily complex.

None of this is a secret. The Chinese government announced a multi-billion dollar program to try and recreate such a machine from scratch. Expected timeline is 20 years with a highly uncertain outcome.

ASML does not have a concern to export to China, they want to export to China but are pressured to not do so by the US government.

[berkes]

> ASML's EUV machines cannot be reverse engineered.

Probably not as carbon-copy. But certainly important parts, or older versions.

ASML isn't just selling a millions-dollar-machine, they sell maintenance, support, upgrades, refurbishing. All these pieces are important in themselves, not just the whole assembled machine. Any single piece that can be reversed-engineered can be a danger to their moat.

This isn't just ASML, this is any hi-tech industry. I worked in power-plants, where ABB didn't just sell us gas-turbines, they sold a package, from Swiss engineers coming twice a year to help us tune them to "we now have these nozzles that make them 1.2% more efficient in hot weather, we can come replace them". Or the story on the HN frontpage recently, where Russian airlines are running out of brakes: just imagine being, say, a Russian factory that makes, say, brakes for Tupolevs and you can reverse-engineer Airbus brakes and start making them. High margins guaranteed.

So yes: ASML is rightfully very careful with Chinese competion and espionage¹

¹ https://nos-nl.translate.goog/artikel/2280228-wat-heeft-de-c...

[ironborn123]

All what you said may be true, but ASML would still be foolish to trust and export to China, given that the latter is hell bent on copying and reverse engg its products, even if unsuccessfully for now.

Dont assist even your incompetent adversary. Competition 101.

[JumpCrisscross]

> the US has been talking about bombing TSMC themselves[]

The U.S. said nothing of the sort. One Congressman, in the minority no less, did.

[colechristensen]

Of course there is a plan somewhere for this kind of thing, that's how war works.

But an idiot fringe congressman spouting such things does not make a credible threat or say anything about the actual intentions about the country, just a good way for somebody to get attention or some points from one hardline group or another.

[coliveira]

You can say this about any US policy, until it is officially announced. It turns out that the US gov has made all the moves to weaponize Taiwan and make it the center of a war against China, so what is the surprise that they will bomb Taiwan if needed?

[BlueTemplar]

Isn't Taiwan planning to bomb itself if China invades ?

[martin8412]

Because of the geography of Taiwan, the idea is to turn Taiwan into a porcupine. Make it prohibitively expensive and deadly to try and invade. Taiwan armed to the teeth with modern American weaponry will go a long way to accomplish that.

[oblio]

> People who don't understand what OP just wrote should look at what just happened to the South Korean semiconductor market. over 36% plunge in exports[] and that samsungs memory profit dropped 95%.

Is demand for electronics finally dropping? I want to be able to buy a 3 year old Nvidia low-range GPU at below MSRP...

[nottorp]

I've been forwarded this piece of apparently bad news recently:

https://www.extremetech.com/gaming/report-nvidia-has-practic...

So I wouldn't hold my breath.

[BlueTemplar]

Why would people not just buy AMD GPUs instead ? It's not like they are much worse, in fact last I checked it was Nvidia GPUs that were problematic if you had Linux in mind !

[mordae]

I have "ancien"t Vega 64 and I enjoy a lot of recent games with Lutris and Steam.

[stefanfisk]

One reason is CUDA.

[sangnoir]

> Is demand for electronics finally dropping?

Unfortunately, it is likely to be limited to flash storage. The $/GB value has fallen to historic lows for all manner of solid-state storage devices.

[strbean]

Wasn't there a whole DRAM price fixing cartel that blew up recently?

[photochemsyn]

The stated reason for delaying the fab construction is a lack of skilled labor in the USA, which does make sense - that's what happens when you hollow out domestic manufacturing in the name of increased corporate profits from outsourcing.

> "“There is an insufficient amount of skilled workers” with the expertise to build a chip factory, TSMC chairman Mark Liu complained during a call with analysts. The executive warned the company might have to fly in “experienced technicians from Taiwan to train the local skilled workers for a short period of time.”"

https://fortune.com/2023/07/21/tsmc-complains-cant-find-enou...

[coredog64]

Insufficient at the price TSMC is willing to pay for all those hours.

The neighborhood around ASU in Tempe, AZ is chock full of fabs that have been built or expanded recently. Please take the “hollowed out workforce” to a different discussion where it actually applies.

[gsatic]

All this while demand is not growing like it once was. Lot of these projects will bomb. And the west doesnt have docile easy to dominate labour that east asia has. They will never achieve the same margins. And as soon as China-Taiwan chapter is over, corporate robots will happily return.

[littlestymaar]

> And as soon as China-Taiwan chapter is over

That's a very strong prerequisite though… It may not be over for several decades to come.

[gsatic]

After what happened to hong kong, its hard to believe that.

[littlestymaar]

No offense but there's no possible comparison between the two, and comparing the situations only highlight your lack of understanding of the situations:

- Hong Kong belonged to China already, it just had a special status that was supposed to expire at some point, Xi “just” went ahead of schedule but there wasn't anything to stop him from doing so (no independent HK government, no army, etc)

- Taiwan is a complete state, with a government and an army, a navy and an air force equipped with Western and mordern home-grown equipment, cruise missiles and anti-ship missiles and so on. Without a Western direct armed intervention, Taiwan is almost always expected to fall after a few weeks by Western military analysts (though the same analysts also expected Ukraine to be unable to match Russia on conventional battles), but even the current predictions on Taiwan suggests that China will pay a signifiy cost in terms of casualties and and material even if they succeeded eventually. And again the success assumes no military actions from the West. Of course Xi may take his chance anyway, but the situation would still be incomparable to HK.

[baybal2]

> Hong Kong belonged to China already, it just had a special status that was supposed to expire at some point

Hong Kong was leased to the British Crown in the perpetuity.

[sparrowInHand]

If there was a spark of integrity left, a whole generation would step back from there posts in lock and file out of the building. Not a grey hair to be found after the whole Neo-Lib-Con episode.

[JumpCrisscross]

You don’t see how that would immediately produce blowback? Is Congress going to say “oh shucks” and authorise another weapons deal? Or might they redirect those dollars domestically while reducing patrols of the Taiwan Straits?

[sealeck]

It's extremely unlikely for the US to do that as if China takes Taiwan it will be a huge blow to the US and to the value of being a US ally.

[crote]

Not for this fab. The technology is quite old, so it doesn't directly change anything about our reliance on Taiwan's cutting-edge fabs.

[madsbuch]

My impression is that TSMC is a Taiwanese company, why this would not be onshoring, but offshoring.

The more appropriate term is probably foreign direct investment (FDI) in Germany from TSMC.

I find it funny that western people have issue with the idea that Asian companies can indeed also invest in western countries. It is akin to some discussion about Lega here on HN where some people talked about it as "onshoring" when they made a US factory – Lego is a Danish comapny.

[thiago_fm]

More like the opposite, by making ties with other countries, Taiwan will win some geopolitical points.

TSMC alone has no control over if the Chinese government will commit such aggression, if they would do their whole company strategy based on fearing the CCP, there's no way they can be successful.

[Vespasian]

I think this is true. China is working really hard to get it's domestic semiconducter industry up to speed.

They are willing to burn a lot of money and time to reach their overall political goal of annexing Taiwan even if it takes a very very long time.

Ultimately it's unrealistic to assume that a country of 1.4 Billion people can not catch up eventually espescially if they would otherwise have to rely on a global competitor (US) or a military target which factories are rigged to blow (Taiwan).

The best thing Taiwan can do (once their semiconductor lead is no more) is to make themselves into a strategic ally located on Chinas doorstep.

[MengerSponge]

China is willing to point a firehose of resouroces at development targets, but that doesn't guarantee success. Semiconductors are really stinking hard!

East Germany famously tried really hard to develop a native capability, but failed and wound up smuggling parts from the west and running years behind western firms: https://www.youtube.com/watch?v=cxrkC-pMH_s

China is more willing to both reward and hold senior stakeholders responsible, as long as they aren't too closely allied with Xi

[JumpCrisscross]

> it's unrealistic to assume that a country of 1.4 Billion people can not catch up eventually

Why? By 2100, each of Pakistan, the D.R.C. and Kenya are forecast to have larger populations than America [1]. Is it unrealistic to assume they won’t be at parity with the west in eighty years? (Note: not saying dismiss entirely. Just baselines.)

China has a lot going for it in semiconductors. Demography isn’t one of them. The population is aging and shrinking. That, ceteris paribus, reduces surplus capital for R&D.

[1] https://en.wikipedia.org/wiki/Projections_of_population_grow...

[mschuster91]

> By 2100, each of Pakistan, the D.R.C. and Kenya are forecast to have larger populations than America. Is it unrealistic to assume they won’t be at parity with the west in eighty years?

Pakistan has the best chances to rise, at least assuming religious / ethnic tensions can be somewhat placated, it doesn't become a hotbed of natural disasters like last year's floods and they don't either get into open war with India or suffer from some sort of coups by the military or secret services.

Kenya and especially Congo? That's a different game entirely. Climate change, utter poverty and endemic corruption are just a couple of the hurdles to pass.

[guiriduro]

Climate change is already having the bigger impact on Pakistan - aside from 48C Karachi, last year saw incredible flooding.

[dirtyid]

>Why?

Because PRC is not systemically comparable to those countries just like Japan isn't comparable to a larger Nigeria.

Only the most cognitively challenged demographic determinists argue larger population = more capability. Useful demographic analysis more than naive reading of demographic pyramid, it's recognizing unlike most developing countries, PRC has established record to upskill/cultivate and coordinate human capita at scale. And is projected to have multiple times more skilled talent than US by 2050s, moving from current 25% high skilled workforce to 60/70/80% to reflect workforce composition of advanced economies over time.

>Demography isn’t one of them

More than anyone, demography is PRC's greatest advantage for semi and other high tech industries in relevant timelines we're talking about. The workforce for high skilled talent is exploding for another 30+ years. Short/medium term PRC has by relevant measures, the greatest skilled demographic divident ever, and even in stagnation they'll be settling with largest (or second largest relative to India) pool of skilled workforce, with again proven ability to coordinate (i.e. not India performance).

Even 2100 PRC working age population is still ~2x of 2100 US if you tally up pyramid projections of 20-65 yr olds. Except PRC's 2100 workforce will likely have more than 2x current skilled talent instead of being dragged down by 100s of millions of farmers and surplus informal workers who will age out post 2050s to be replaced by better educated/more productive cohorts. Same way other Asian tigers grew despite "bad demographics" - by continuously upskilling % of workforce initially dominated by peasants over time.

This is why current analysis of US semi workforce project 80k short term shortage to balloon to 300-400k medium term. SKR, TW both have current/short term 50-100k shortage. The TLDR is SKR, TW (and JP) have nearly satuated their workforce in terms of skilled talent, and can't replace at parity. US expanding fabs as rate their talent pipeline can't catch up, and the ability to import/brain drain is limited because they'll be taking from other CHIP4 partners also undergoing shortage. Which leaves PRC, who after elevating semi to first-level dicipline in 2018 is pumping out about 30k IC graduates per year. They're still about 200k short, ~520k/720k (400k in 2018) out of what IC talent 2018 white paper estimated PRC needed for completely indigenous semi industry, which US isn't currently even trying to pursue, still ultimately relying on east asian semi supply chains. Long term US may to get there, but right now only PRC is sent to close semi labour force gap within the decade. Ultimately, talent is just as important in industrial policy as money. PRC has both. Their biggest shortcoming is being behind, which will likely be addressed by investing sufficient talent and money.

[The_Colonel]

Even endless money is no guarantee of a success, especially with a rampant corruption and preference for loyalty as opposed to competency.

[mensetmanusman]

Onshoring is impossible for most countries. TSMC had an annual capital budget of >$50B, there are only like 30 countries with >$100B in total government revenue:

https://en.m.wikipedia.org/wiki/List_of_countries_by_governm...

[bluecalm]

But only like 5 countries matter for Taiwan national security and those have the budget.

[manojlds]

How many of those countries are going to protect Taiwan?

[mrweasel]

These fabs are going to be built, with or without TSMC. I do have a bit more confidence in the long term success of US fabs, compared to the EU one, but there's a good chance that both will succeed, to some extend.

The Taiwanese government can attempt to prevent TSMC in participating, but what good will that do? Might as well ensure that TSMC at least have a hand in it and avoid customers leaving for another manufacturer. TSMC can then offer fabrication, maybe it's in the EU, maybe it's in Taiwan, the important part is keeping the customer and not allowing competitors to establish themselves.

[rsynnott]

TSMC is a big buyer of fab equipment from European and US companies; that could quickly become a _very_ ugly trade war.

[nabla9]

TSMC is not building GIGAFAB outside Taiwan.

This in Germany and the one in the US are both Megafabs.They produce chips for special industries with strategic importance. In the US for military and defense, in the Europe for automotive industry and automation.

[UncleOxidant]

Having so much reliance on advanced semiconductors from an island that's potentially going to be invaded by China doesn't seem like a great plan for the US and Europe. It absolutely makes sense for both the US and Europe to incentivize production in their own countries to diversify. If the fabs in Taiwan were to be damaged without building up this domestic capability we'd have a tough time defending Taiwan after a while anyway.

[sergiotapia]

It's game theory no?

Having this beefy reliance on a small island that gives china the middle finger

-OR-

derisk the reliance on taiwan

[tetha]

I don't think it's that simple, because the effort necessary to employ the different choices are very different.

Stopping cargo going out of Taiwan is rather cheap. Unguided rockets and aircraft from your homeland can do a lot. And then they just have to defend near their home land while waiting for their opponent to run out of resources.

At the same time, as we can see here, it takes 4 years to go from acre to functional fab plant after planning and negotiations. And any kind of war to regain control of the chip supply lane is a significant drain on the chips and systems reliant on the chips you have.

[ironborn123]

Yes but both sides can play the game of blocking cargo. Malacca strait comes to mind.

[YetAnotherNick]

We are talking about potential WW3, and you are worried about world loosing 2 years of progress due to war. Currently, Samsung is 2-3 years behind and Intel is 3-4 years behind and the gap is shrinking as we approach EUV limit.

Millions of lives would be lost if not more if it will be a full scale war. A chip fab is nowhere the same level of importance to be even discussed on the table.

[andrewstuart]

They probably figure it’s better to be the one doing it than someone else.

[01100011]

I'm wondering if these offshore fab announcements from TSMC are more like unserious offers intended to delay other countries from pushing harder to establish local semiconductor industries. TSMC is already delaying the Arizona plant in the US. Maybe that was their intent from the beginning?

"But they've spent X billions of dollars." Yes but this is irrelevant when facing off an existential threat to their business and the overall economy and security of Taiwan. Taiwan, like Israel, is run by cunning folks. They wouldn't have survived this long otherwise.

[toss1]

It is not just Taiwan's advanced manufacturing that is critical to the free world — an enormous amount of shipping for Japan also goes through the Straits Of Taiwan. This is just part of the reason that the US Navy frequently runs freedom of navigation exercises through those waters.

Mere reduction of the criticality of Taiwan's advanced manufacturing will not eliminate Taiwan's geostrategic importance.

Plus, the CCP's insistence on being an expansionist authoritarian state is reason enough to contain that expansion, to prevent further resource gains.

[mordae]

So far they don't feel that expansionist. More likely they just don't want US to be able to cut them off from the rest of the world by naval blockade.

[toss1]

"don't feel that expansionist"?!?

Sure, if you ignore their military actions and treaty violations in Tibet, Turkistan (Uyghurs), border conflicts around the Himalyas and India, Russia (border conflict), Korea, Vietnam, everywhere on the "9-dash line", Canada and the US (where they are putting up remote "police stations" to intimidate anyone expressing opinions they dislike)...

CCP has a highly consistent history of being as aggressive and untrustworthy as they can get away with. Anyone trusting them is a fool.

[christkv]

A much better strategy is to work slow :). Drag out every phase.

[christkv]

Also ASML has a super long backlog I think so even if they build it they would have years to wait to even get and install the equipment

[DrBazza]

TSMC buy the fab equipment ASML based in the Netherlands.

[throw0101b]

NL could block it on national security grounds.

[mytailorisrich]

Depends on what the US tell NL to do, as we've seen before.

[KingOfCoders]

These days are over - they ended with the war in Iraq. In the 80s the US said "Jump!" and western Europe asked "How high?".

[FirmwareBurner]

You're wrong, your parent is correct. NL government had to block sales of ASML EUV machines to China on the US's request since they didn't want to enable China build advanced chips.

ASML definitely wanted to sell to China to increase their quarterly revenues but couldn't because the US owns the IP for the EUV tech and ASML's EUV light sources are made by CYMER in the US, which ASML bought but they're still under US trade restrictions.

So no, ASML and the NL government have to dance according to the moves dictated by the US gov as they own the keys to EUV tech, not ASML/NL.

[Slartie]

In the grand scheme you are correct - there is enough US corporations' tech in ASML machines so that the US government has enough leverage to force ASML to comply with its export restrictions.

But your details aren't exactly right, I think. Cymer builds light sources for DUV, not EUV. The EUV light sources are built by Trumpf in Germany, at least as far as I know.

[michaelt]

Well, to an extent.

But as we saw with the Evo Morales grounding incident https://en.wikipedia.org/wiki/Evo_Morales_grounding_incident there's still a certain amount of jumping.

[throw0101b]

ASML has suppliers in the US, so if the US does not like what ASML/NL are doing they could block exports of certain components to certain destinations.

Also remember that a lot (all?) of the circuit design software is US-based, so the supply chain could be squeezed from that direction as well.

[christkv]

Europe is still doing it, and when they don’t the us applies pressure through its closest European Allies. The us is very much still involved in classic Cold War stuff in Europe. The Ukrainian war has been very good to American exports of arms and liquid gas.

[AlchemistCamp]

> The Ukrainian war has been very good to American exports of arms

By "exports", do you mean donations? https://www.bbc.com/news/world-us-canada-64656301

[junon]

Couldn't TSMC cease or hinder operations if their HQs is threatened and their partnering countries do nothing? Seems like more leverage and ally building than the opposite to me.

[coliveira]

The USA has guaranteed the demise of Taiwan by making it the next target of a global war. Everyone knows that China is not going back on a territory that is theirs by international treaties, and the US has practically declared they will fight to separate Taiwan from China. The only thing that remains for Taiwanese companies is to move from homeland into other countries as a way to survive. Actually, this is probably what the US gov wanted in the first place, so they destroyed another competitor.

[MangoCoffee]

>Everyone knows that China is not going back on a territory that is theirs by international treaties

When you said China, which China are we talking about?. the fact is, Taiwan and China is still in a Civil War.

    The United States did not explicitly state the sovereign status of Taiwan in the three US-PRC Joint Communiqués of 1972, 1979, and 1982.

    The United States "acknowledged" the "One China" position of both sides of the Taiwan Strait.

    U.S. policy has not recognized the PRC's sovereignty over Taiwan;

    U.S. policy has not recognized Taiwan as a sovereign country; and

    U.S. policy has considered Taiwan's status as unsettled.

https://en.wikipedia.org/wiki/One_China#United_States_policy

[brobinson]

"that is theirs by international treaties"

The PRC has never, not even for a single day, controlled Taiwan, Kinmen, Matsu, etc.

The continued existence of the ROC (1912-present) truly causes tankies to lose their minds.

[t43562]

To make Taiwan less critical makes it less attractive as a target - China won't be able to damage the US so much by taking Taiwan. It will be harder for China to force other people to accept their action.

[coliveira]

This doesn't make Taiwan less critical for China. They will continue to defend Taiwan as part of China for the foreseeable future.

[t43562]

Not less critical but you see if they steal something the rest of the world needs then they can hold the world to ransom but if the rest of the world has alternatives then they can't. That has to change their calculations about when and how they will make a move.

[coliveira]

Why do you think Taiwan reuniting with China would steal anything from the rest of the world? Nothing in Taiwan is owned by the rest of the world, Taiwan itself owns what they have. And the Chinese government will not stop selling what Taiwan produces.

[t43562]

Steal from Taiwan. And once you control a resource you can control access to it based on who pleases you the most.

[xp84]

This is the most CCP comment I’ve read in years. Okay, Xi

[coliveira]

This is a logical assessment of the situation, it doesn't matter you don't like it.

[pelorat]

Only logical if you accept the CCP as a legitimate government, which barely any politician in Europe, the USA and the rest of the west does (privately).

[coliveira]

Not only CPC is a legitimate government, but it is effectively supported by the West. Do you mean that practically all governments of the world have agreements and deals with an illegitimate entity? They would be otherwise collectively gilt of making ilegal dealings.

[xp84]

Deals are made out of practicality. For instance the US did deals with Osama Bin Laden once upon a time. Doesn’t mean anyone wants them taking over a country that has a democracy. If ROC wanted to join China, let them vote to elect the CPC, eh?

[ironborn123]

It would only be logical if Chinese intent also matched its capabilities, which remains to be seen.

Anyone can talk a big game.