China News Agency, Beijing, February 24 (Reporter Liu Shuling) US media reported that the US Secretary of Commerce announced on the 23rd that it would use the US $52.7 billion policy funds launched under the Chip and Science Act of 2022 (hereinafter referred to as the “Chip Act”) to establish at least two chip manufacturing clusters, and would open subsidy applications to enterprises in the near future. However, Taiwan’s finance and economics people recently said that they did not believe that the so-called “chip reflow” in the United States would succeed.
Recently, Pelosi, the former speaker of the United States House of Representatives, disclosed a conversation from Zhang Zhongmou, founder of TSMC, to the political news website “Politico” last August. The latter told her face to face in Taipei and other members of the United States Congress that it would be naive if the United States thought that it would invest a lot of money to enter the top chip manufacturing market. Pelosi said that other senior executives of Taiwan enterprises present also raised questions, but she conveyed the message that the United States was “determined to succeed”.
At present, relevant measures around the US “chip bill” have made progress. At the beginning of December last year, TSMC held a relocation ceremony for the chip factory in Arizona, the United States, and announced that the second phase of the project would set up the most advanced 3-nanometer process, with an investment of 40 billion dollars. In addition, many well-known companies in the chip industry, including Samsung, are also transferring capacity to the United States. US $52.7 billion of policy funds will make this fire even more prosperous.
However, it is still the common view of many Taiwanese financiers to look down on the prospects of the “chip bill”. Wang Anya, a famous former analyst of Taiwan’s foreign investment circle and scholar of Taiwan’s Political University, said in a TV interview program recently that, in a long period of time, TSMC’s American factory will never make money. He believes that the price of chip manufacturing equipment is the same in all parts of the world, but the cost outside the equipment (made in the United States) is four times that of Taiwan. The United States subsidizes chip companies with taxpayers’ money. Without making money, companies can only pass the cost on to American consumers, which only causes inflation from beginning to end.
Taiwan’s chip industry analysts, such as Lu Hangzhi, who are highly valued by the market, also raised a number of questions, including: How much share can TSMC and other non-US companies get? Will the establishment of inefficient capacity in the United States reduce the long-term profit performance of enterprises and ultimately drag down the entire industry?
Warren Buffett’s Berkshire Hathaway Company disclosed on February 14 that it had reduced its holdings of 86% of TSMC’s shares, further exacerbating the concerns of Taiwan’s financial sector. In the third quarter of 2022, Berkshire Hathaway just bought 61 million shares of TSMC with a value of more than US $4 billion, which once made Taiwan’s civil and financial circles feel excited. Unexpectedly, it sold a lot in only one quarter.
After exploring various possible reasons, it is generally believed that the “injury” of TSMC shareholders’ equity return rate is the key. Chen Fengxin, a Taiwanese financial media person, recently analyzed that TSMC’s past model of “Taiwan’s production and service to global customers” will have significant changes. After announcing in December that it will invest in the United States and Japan, it may also invest in Germany in the future. The company serves regional customers with regional production, significantly increasing costs, and gross profit margin and return on shareholders’ equity are bound to deteriorate, thus affecting market decisions.
Wang Anya and Chen Fengxin both mentioned that the more far-reaching impact is that the United States has increased significantly at the peak of this round of chip industry boom. It can be expected that it will be very hard when the trough occurs. Take the recent wave of layoffs in the US technology industry as an example. If the company’s profits are slightly poor, it will respond with layoffs; However, chip manufacturing must maintain a stable team of engineers, and even invest more in the downturn. The “upwind approach” scenario is difficult to achieve in the United States, which is also an important reason why “chip reflow” is almost impossible to succeed.
American media pointed out that Zhang Zhongmou had actually given Pelosi a sharp reminder that the equipment worth tens of billions of dollars would soon become obsolete if the high-quality factories invested heavily were not invested continuously.
In this regard, some people in Taiwan’s financial circles have no choice but to say that this is an era in which politicians dominate the economy. We must let it go through a round and think about how to rearrange it.
Post time: Feb-24-2023