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Why do the costs of building a new computer chip fabrication plant in Arizona seem to be so much higher than in, for example, Taiwan?
According to James Freeman in the WSJ:
From a CQ-Roll Call transcript with Taiwan Semiconductor CFO Wendell Huang:
Let me share with you this. The Arizona fab. We make the decision based on customers’ request… We’re not able to share with you a specific cost gap number between Taiwan and U.S., but we can share with you that the major reason for the cost gap is the construction cost of building and facilities, which can be 4 to 5x greater for U.S. fab versus a fab in Taiwan.
Deterring Growth and Investment
The high cost of construction includes labor cost, cost of permits, cost of occupational safety and health regulations, inflationary costs in recent years and people and learning curve costs. Therefore, the initial costs of overseas fabs are higher than our fabs in Taiwan.
Pointing to the Obvious
Mr. Freeman continues, “There’s a lot of government in that explanation of building costs.”
What makes this story especially disturbing is that Arizona routinely ranks among the most competitive U.S. states when it comes to tax and regulatory burdens. The Grand Canyon State is a fast-growing, innovation-friendly success story in the context of the American economy.
Thank goodness Mr. Huang’s customers didn’t ask him to try to build something in New Jersey. If Arizona isn’t highly attractive for such investments, it suggests we have a national problem.
President Biden has been crowing lately about all the money he’s spending to subsidize the semiconductor industry. Mr. Freeman continues,
Why not just save the taxpayer subsidies and make it easier for this industry and every other industry to build in the U.S.?
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