AMD Confirms Increased Costs for TSMC's US-Manufactured Chips

Advanced Micro Devices (AMD) has disclosed that the production costs for chips manufactured in Taiwan Semiconductor Manufacturing Company's (TSMC) new facility in the United States will be higher than those produced in Taiwan. This discrepancy is primarily attributed to elevated operating expenses in the U.S., particularly due to labor costs.

During a recent event, AMD's CEO indicated that the price increase for U.S.-manufactured chips would fall between 5% and 20%. This means that, in certain scenarios, the additional costs could reach double digits in U.S. dollars. This price increase will also apply to other prominent clients such as Apple and Nvidia.

AMD relies on TSMC, the largest contract chip manufacturer globally, for the production of all its chips and chiplets used in current processors and graphics cards. While most of these chips are currently produced in Taiwan, AMD is set to begin manufacturing CPU compute chiplets from the upcoming Zen-5 generation using 4-nanometer technology at the Arizona facility.

These chips are intended for the Epyc 9005 series, also known as Turin, which targets server processors. Given that the prices for these server models are significantly higher than those for desktop and laptop CPUs, AMD is in a position to absorb the increased costs without impacting market competitiveness. Prices for these models range from $527 for the Epyc 9015 to $12,984 for the Epyc 9755. AMD's strategy of dividing CPU cores into multiple chiplets helps maintain high production yields, which in turn significantly boosts profit margins from entry-level to high-end models.

However, AMD will not be able to manufacture chiplets for the 192-core Epyc 9965 in the U.S., as it utilizes more compact Zen-5c cores that are currently only produced using 3-nanometer technology in Taiwan.

In discussions with Bloomberg, AMD's CEO expressed that the additional costs could be justified by the benefits of diversifying the supply chain. This strategic move allows AMD to market products that are partially labeled as 'Made in the USA,' potentially positioning the company favorably with the current U.S. administration.