The Peter Zeihan Podcast Series - TSMC's Semiconductor Production in the USA || Peter Zeihan

Episode Date: December 9, 2024

I've done a handful of videos on semiconductors and there's a very good reason for that. The production of semiconductors and the companies involved will be under the spotlight for the next few years as the entire industry gets shaken up.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/tsmcs-semiconductor-production-in-the-usa

Everybody, Peter Zane here coming to you from the Boston Logan Airport. It is not quite five in the morning and blah. Anyway, still a decent backdrop. So we're going to take an entry from the Ask Peter forum. Specifically, could I give an update on the status of TSM's efforts to establish chipmaking here in the United States? I'm happy to report that it's actually going a little better than I thought I was going to. The very short version is that Donald Trump almost four. forced TSM to relocate some of its production capacity to the United States and made it very clear

that he wanted the very, very, very top end to be made here. And TSMC said, sure, of course, whatever, and then proceeded to drag its feet in every possible way. Remember that the leading edge of chips these days is less than three nanometers, getting into two nanometers, and probably within the next couple of years getting into 1.5 and maybe even one nanometer. The facilities, that are under construction in Arizona, have been drug out and drug out and drug out and drug out with, in many cases, TSM not even providing proper architectural blueprints so far. And so there's been construction, and then they tear things down.

And then they rebuild something and tear it down. And they're basically just buying time. But the first facility actually is operational. It's just not the cutting edge. It's at like four nanometer, which is still pretty good. But it's not the kind of stuff you're going to probably put into an AI server farm or anything. Anyway, part of the big news that came out in the late October was the idea that they're getting a higher recovery rate from the new facilities in Phoenix and they're getting anywhere else. And while this is an important development, you shouldn't get too excited.

So the process for making the chips, you take a little bitty seed crystal, you put it into a pool of liquid silicon, and then you steadily pull it up over the course of several days to grow a crystal, and that crystal ends up weighing more than a Volkswagen. It tends to be over a foot or two across and about nine feet long, I mean, it's a little different at every facility, to get this giant ingot, and then you slice it laterally into thin discs. You then use a combination of lithography and baking and doping to etch those chips. You then bake them to make sure that everything sticks, and then you do it again and again and again, again, again, again, again, again, again, you know,

something like 90 times. It takes a few months to make each individual sheet. The waste is one of two. two things. Number one, you have a section of the semiconductor sheet that just doesn't work, so that would be waste. Or maybe it's just the shape, because usually your chips are squares or rectangles, and the disk is a disk, it's round, so you're going to have waste at the edges. So TSM is famous for having the highest recovery rates in the industry with, and with its four nanometer nodes, something like 90% coherent and only 10% waste. Well, the TSM facility,

facility, it's now 94% coherent. So it is an important technological jump. It does drop the overall cost of the items you being produced. And since U.S. labor is more expensive than Taiwanese labor, you know, that's great. But don't get too excited about it. Something else to keep in mind about these facilities. Is the labor that is necessary very highly skilled? Yes. Is there a lot of labor? Not really. Most of this is automated. Because you're using a lithography facility that is being produced by ASML, the Dutch company, you know, it's automated. The whole point of extreme ultraviolet is it doesn't require a lot of manual adjustments. The old technology, deep ultraviolet, now that did. And so when you are doing DEV, you're constantly having changes to every

individual machine for every individual run. You get much higher wastage because the chips aren't all exactly the same. With EUV, it's all automated. You have to do it once. You can apply it across the entire system for every lithography machine in your facility, and the chips come out much more regular. It's kind of like an analog versus digital sort of thing. So one of the constraints we have faced with moving this stuff from Taiwan to the United States is that the labor costs more, and it's not quite trained right. But with EUV, that doesn't matter as much as it would have with the older technologies. Anyway, it's moving ahead. Facilities two through five, God knows when those are going to operational, because those are supposed to be the higher end ones, but this, a lot of

low-end, high-end chip of four nanometers. Seems to be moving along just fine. Just keep in mind that the real breakthroughs aren't going to be coming from TSM this year. If, if, if, if, if the United States is really going to get in the game of high-end semiconductors, it's going to be using a new lithography technology called high numerical aperture,

which is like the next generation of extreme multivolite. TSM isn't bothering to work with that. That's an Intel project. The Dutch have provided, the ASML has provided the technology to both companies and only US's Intel bit. And that is the technology that is going to be used at the Columbus facility, which hopes to begin operations in 2026. We'll see.