the problem is that semiconductor industry does not pay enough in America. The smartest people go for the highest salary jobs in Silicon Valley or Wall Street (or crypto now). Whether or not the policy makers like it, American job market is going further away from Industrial Age to digital age. Why get paid $150k a year at a fab plant when you can make 500k working remotely for a crypto company? That's the problem Intel faces.
The issue here is that you don't seem to understand the labour market here in America. Talented engineers do not want to work in Arizona or in semiconductor industry. There is very high turnover for employers that don't give the kind of lifestyle that they would get from other tech firms. Among low skilled labour, the cost is ever increasing. I can guarantee you that the productivity rate in Arizona would be a fraction of what it is in Taiwan due to these reasons. So while they may announce that 1600 employees are planned, they are going to be paying a lot more people than that due to the ongoing new employee training, early termination and transitioning they are going to be dealing with. Just wait until the environmentalists start to converge in their Arizona plant a few years from now. A lot of money will need to be set aside from lobbyists and lawyers.
Just to give you an idea of turnover rate at large tech firms. In my first year out of college at Bloomberg, they told me 27% of employees there were hired in the past year. The first 2 or 3 months I was there was purely training. I really wasn't productive until at least 6 months in. Now, just consider what it would be like in Arizona where techies don't want to go.
None of this even factors in the higher corporate tax rate, payroll taxes, 401K and the outrageous health care costs we have here in America.
The other issue is that you assume that they would be able to get the same output at Arizona plant as they would from other plants. You also assume they can get the same revenue for each 5 nm chips 5 years from now. What's the point of investing in new tools and equipments if the old chips continue to bring in the same revenues? Let's never pay for upgrades or buy new machines if we can sell the current generation chips at the same price 20 years from now.
Where is the raw material costs in your calculation?
The raw material cost is factored in as part of Salary+OpEx (Cost of Revenue - depreciation....the difference accounts for salaries related to fabrication of wafers as well as the raw material).
The 401K, health care cost, etc are factor in by assuming doubling of costs in Taiwan. Do you think this is not generous enough of an assumption? What would your version of estimate look like?
This will not be a RD fab, no need for top notch people. I worked out of Austin, Boise, and Silicon Vally in my career, and in my humble opinion is that there is a gap in terms of talent needed for a RD fab vs a non-leading edge production fab where all you would expect of the engineers is to monitor the process and take care of any out of control situations. In this type of setting most of the time, the engineers rely on vendors to troubleshoot and fix the problem. Equipment & process engineers are more of a manager of suppliers. I hope you know process flow in a mass production fab is mostly automated. Why would you need top notch talent to babysit a SPC chart and follow protocol to call in the vendor to fix problems or to refine process recipes? No need for these engineers to innovate or invent anything. This is how things work in TSMC high volume manufacturing fab.
Even if more engineers are needed, the margin after equipment are fully depreciated is so high that the additional labor cost would not be much of an impact on bottom line. In terms of wafer cost, the actual wafer cost today is higher than what I used. And with 2D shrinking slowing down, we are expecting node-on-node discount (when new node is introduced) will slow down, so at 15%-20% discount by 2025, the bottom line, again, will still be pretty high.
Again, I'm merely providing a quick and dirty calculation estimate. You are free to crunch a set of number with gradually discounted wafer price, increasing wage, and take inflation into consideration, and other more refined variables into consideration. The main point I'm making is, it's not a doomsday situation for tsmc. I'm sure your more precise model or analysis will not debunk my point.
