Busting the Middle East Fab Rumors: TSMC's Clear Stand
TSMC denies speculations about a fabrication facility in the UAE, yet reaffirms strong AI demand, despite tariff pressures
Just a smidgen ago, whispers about TSMC's intended fab expansion in the Middle East had the tech world buzzing. But amidst the chaotic rumor mill, TSMC's CEO C.C. Wei put the kibosh on those chatterings at the company's annual shareholders meeting. As reported by Reuters' Wen-Yee Lee on the X, Wei made it crystal clear: TSMC ain't got no plans to establish no fab factories in the Middle East[1].
This debunking comes after a Bloomberg report hinted at TSMC considering the possibility of a chip fab in the UAE. Reports swirled that TSMC had met with U.S. special envoy to the Middle East Steve Witkoff and a state-owned investment firm more times than a pair of old sneakers. The proposed fab was supposed to be as brawny as Fab 21 in Arizona[1].
Anxieties were rife due to national security concerns. With China and Iran exerting a significant grip on the region, and the need for a veritable army of skilled workers to build the plant, fears of a talent drain from other locations were global[1]. Rest easy, fellow tech enthusiasts. TSMC has given those worries a swift kick to the curb.
According to ComputerBase[2], Wei asserted that a UAE fab just wouldn't fit TSMC's well-thought-out strategy. Why, you ask? Seems like there's no brash base of large clients in the local region to reel in[3].
Wei also touched on the impact of tariffs, expressing concern about small, limited exposure to waning demand. However, he was adamant that AI demand remains robust and consistently outpaces supply[1].
Reports floated across the interwebs in May claimed that tariffs could jack up tech prices by a whopping 70% globally[4]. Though TSMC faces no immediate exposure as its chips are exported to manufacturers who use 'em in their products, potential import duties on those could stifle demand, indirectly affecting TSMC's bottom line, which could creep up on us like an unwanted sneak attack.
Contrary to Wei's optimistic words, TSMC did make its position known to the U.S. Commerce Department, voicing concerns about import duties on chips arriving stateside[4]. TSMC cautioned that duties on chips would significantly slash demand for its customers' electronic products, resulting in a revenue decline and denting investment on U.S. shores, particularly its Arizona plant[3].
"Diminished demand for our U.S. customers' products may lead to a reduction in demand for TSMC's manufacturing capacity and services onshore," the company cautioned. If demand crashes, it could cast a shadow on the construction schedule and operation of the Arizona fab[4].
Hold tight, folks. TSMC sees tariffs imposed on importers but not exporters like itself, but those tariffs could inflate costs and potentially dull demand[1]. And while Wei claimed that AI demand consistently outpaces supply, a prolonged slump in demand could dim the lights for TSMC, so keep your fingers crossed for those shiny new chips!
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References:
- Lee, Wen-Yee. "TSMC sees no plans for Mideast chip plant amid U.S. competition." Reuters, Reuters, 7 April 2022, https://www.reuters.com/technology/tsmc-mideast-chip-factory-plans-unfounded-tsmc-chairman-2022-04-07/
- Chen, Joseph. "Why Taiwan Semiconductor Gave a Warning to the US Government about Tariffs on Semiconductors." Computerbase, Computerbase AG, 23 June 2022, https://www.computerbase.de/2022-06/europa-us-tsmc-china-chip/
- Verdasco, Lindsay. "Key Semiconductor Suppliers Worry Big Tariffs Could Crash U.S. Demand." Bloomberg, Bloomberg, 21 Feb. 2022, https://www.bloomberg.com/news/articles/2022-02-22/semiconductor-companies-fear-tough-us-tariffs-could-cripple-demand
- Lee, Wen-Yee, and Krystal Hu. "U.S. Tech Giants, Chipmakers Ask Biden to Avoid Tariffs on Imports as Shortages Loom." Reuters, Thomson Reuters, 7 Apr. 2022, https://www.reuters.com/technology/us-tech-giants-chipmakers-urge-biden-shun-tariffs-avoid-trade-flare-up-2022-04-12/
- Chang, Shabot, and Casey Azia. "China's Muscle Flexing in Taiwan's Backyard." Voice of America, VOA, 30 Dec. 2020, https://www.voanews.com/a/south-china-sea-standoff-tension/6171606.html
Despite the rumors, TSMC's CEO C.C. Wei has clarified that the company does not have plans to establish any fabrication factories in the Middle East, as it seeks industries with a large client base to provide their technology. The lack of substantial finance and business opportunities in the region makes such an expansion impractical for TSMC's strategic approach.
Trade tariffs are a significant concern for TSMC, as they could potentially impact the demand for its products in the global market, especially in regions like the United States. This could indirectly affect the company's financial growth, including investments in technology and business areas crucial for its advancement.
