Following new regulations in Taiwan, TSMC is now permitted to transfer its most advanced process technologies to its international factories. Yet, the real challenge lies in whether TSMC can and wants to undertake such a move, given that all of its production technologies are developed within Taiwan. C.C. Wei, TSMC’s CEO and chairman, mentioned that expanding production of TSMC’s cutting-edge manufacturing processes in the U.S. poses significant difficulties. This is primarily due to the distance of the Arizona facilities from the R&D center in Taiwan and the complex bureaucracy in the U.S., as reported by Reuters.

The CEO of TSMC clarified that the introduction of new technology nodes starts in Taiwan because these advanced manufacturing processes are intricate and necessitate proximity to R&D teams. These teams are essential for making specific adjustments to achieve desired outcomes. Although TSMC is eager to deploy the same technologies in both Taiwan and the U.S., logistical hurdles currently make it unfeasible for the U.S. sites to spearhead this initiative. Consequently, Taiwan remains the priority for launching new technologies.

“It’s not that we are unwilling to expand the same technology in the U.S. as in Taiwan,” C.C. Wei stated during the recent earnings call with analysts and investors. “Introducing a new technology into production is so complex that the manufacturing facility must be very close to the R&D personnel. Therefore, the initial ramp-up phase always originates from the facility nearest to R&D. With this in mind, while we aim to develop the same level of technology in the U.S., practical challenges render it somewhat difficult. Thus, Taiwan will always lead,” he explained.

Another significant obstacle for TSMC in advancing its latest process technology in the U.S. is bureaucracy. The construction of the Arizona facility has been notably slower than its counterparts in Taiwan, primarily due to the extensive permitting required, local construction rules, and the absence of streamlined procedures, as noted by C.C. Wei. The company spent $35 million just to address these regulatory complexities, creating 18,000 rules to ensure compliance. Additionally, chemical supply costs are five times higher, leading TSMC to transport sulfuric acid from Taiwan to Los Angeles and subsequently to Arizona.

“Each step necessitates a permit, and once approved, the process takes at least twice as long as in Taiwan,” Wei remarked at a National Taiwan University event, according to Reuters. “We were forced to establish 18,000 rules, costing us $35 million.”

Regulatory hurdles, extensive permitting, and a less agile supply chain not only impact the construction and operation of fabs but also affect the development of next-generation manufacturing processes.

Certain new process technologies necessitate completely new tools and require TSMC to reconsider the design of its fabs. For instance, unlike DUV tools, an EUV lithography tool positions its CO2 laser generator system (including pre-pulse and main pulse seed units, power amplifiers) below the EUV light generator and the fab floor, in a sub-fab floor area. Thus, companies like TSMC need to modify their fab designs. High-NA EUV tools are substantially larger than the current-generation Low-NA EUV tools, necessitating another redesign of TSMC’s fabs.

Moreover, production nodes often utilize new chemicals, such as photoresists, developers, etchants, deposition gases, and cleaning agents, among others. These new chemicals are crucial for advanced manufacturing technologies, and TSMC’s partners in Taiwan can supply what the company’s R&D teams require. In the U.S., however, TSMC struggles to obtain the necessary materials to manufacture chips using a fabrication process that is already four years old.