TSMC in Japan and India’s IPO hopes

Hello everyone, this is Cissy from Hong Kong.

When I was on a summer road trip in Arizona a few years ago, I was pretty upset by the scorching weather: it was way hotter than I had expected! I had to rush back to the car every time I got out to take photos. Then, in 2020, Taiwan Semiconductor Manufacturing Company announced it would build a chip plant in the desert area in north Phoenix, a seemingly odd choice for an industry that demands huge amounts of water.

Last December, my colleague Annie Cheng Ting-Fang travelled to Phoenix to cover TSMC’s equipment installation ceremony at the facility, an event that US president Joe Biden also attended. Since there was no direct flight between Taipei and Phoenix, it took her around 20 hours to get there.

At the ceremony, TSMC founder Morris Chang said he had tried to build a factory in the US in 1995, but the attempt ended in failure due to high costs, cultural clashes and other problems. “The dream fulfilled became a nightmare fulfilled,” Chang recalled.

While no one is describing the Phoenix project as a nightmare, progress has not been entirely smooth, either. For example, some of TSMC’s Taiwanese suppliers complained to Annie about the lengthy review process in the US. One supplier said it had submitted an application for items to be approved, but nearly 10 months later, authorities were still reviewing the first item on the list.

Chang warned at the time that “a lot of hard work remains” even after the company finished its first equipment installation at the facility. It turns out he was right. The scheduled start of mass production at the plant has been pushed back due to a lack of skilled workers.

In Japan, meanwhile, it is a different story.

Speed run

While TSMC has pushed back the start of mass production at its cutting-edge plant in Arizona to 2025, its chip project in Japan is moving more quickly, write Nikkei Asia’s Cheng Ting-Fang and Ryohtaroh Satoh.

TSMC, the world’s biggest chipmaker, will start installing chip production tools in its site in Kumamoto, in southwestern Japan, this month. Once these tools are in place, the company can start test production, and, if all goes well, the $8bn plant will start mass production by the end of next year. Sources involved in the project say it is on track and may even be ahead of schedule.

TSMC said one reason for the divergence between the two countries is the difference in scale between the projects. But chip industry executives told Nikkei that one of the main reasons is that Japan has better chip industry infrastructure than the US and has been more prompt with government support.

Some executives also cited a similar working culture in Japan and Taiwan as a factor behind the Kumamoto project’s progress, along with fewer logistics hurdles. A direct flight between Taipei and Kumamoto, for example, takes just over two hours.

The Kumamoto plant will start out using 28-nanometer and 22-nm production technology. This is a relatively mature production node, but it is used to churn out chips such as image sensors, driver integrated circuits and microcontrollers that are used in everything from smartphones to cars.

The iPhone of AI

Sir Jony Ive, as Apple’s top designer, defined the modern computing era, from the iMac and iPod to the iPhone and Apple Watch. Now he wants to do the same thing for the artificial intelligence age, write the Financial Times’ Tim Bradshaw, Matthew Garrahan and Madhumita Murgia in London and Kana Inagaki in Tokyo.

Ive’s company, LoveFrom, is in talks with Sam Altman of OpenAI and Masayoshi Son of SoftBank to build the “iPhone of artificial intelligence”, according to people familiar with their plans — fuelled by more than $1bn of the Japanese conglomerate’s capital.

Whether that device ends up looking like a phone, a watch, a pair of glasses or something else entirely is still very much up for debate: Many different ideas are on the table at Ive’s San Francisco studio, where he and Altman have been holding brainstorming sessions.

As the FT has previously reported, Son is looking to invest billions in AI following the initial public offering of Arm, the UK-based chip designer in which SoftBank still holds a 90 per cent stake. Arm’s success has been intertwined with that of the smartphone. Son’s latest manoeuvring in Silicon Valley could ensure it retains a central role in whatever comes next.

Foreign affinity

While domestic fund managers in India are generally keeping the country’s lossmaking tech start-ups at arm’s length, foreign investors are embracing them, writes Nikkei Asia’s Sayan Chakraborty.

In the first half of the year, foreign portfolio investors almost tripled their holdings in three Indian start-ups — food delivery service Zomato, logistics company Delhivery, and financial services provider Paytm — leaving them with a much higher share in comparison to Indian institutional investors. Analysts say this divergence underscores foreign investors’ familiarity with highly valued yet lossmaking public companies, particularly in the US, and domestic investors’ reservations about such ventures.

Foreign inflows of investment will be crucial for some of the tech IPOs in the pipeline, particularly the bigger flotations, such as those of hospitality start-up Oyo, baby care retailer Firstcry and food delivery firm Swiggy, where the ask could vary between $500mn to $1bn, executives aware of their plans told Nikkei.

A friend in need

Japan is looking to Canada and Australia for critical materials used in electric vehicle batteries as US policy pushes companies to develop China-free supply chains, writes Nikkei Asia’s Ryohtaroh Satoh.

Yasutoshi Nishimura, Japan’s minister of economy, trade and industry, visited Canada late last month to sign a memorandum on co-operation for building an EV supply chain. The two countries plan to offer government subsidies to Japanese companies looking to enter Canada to develop sources of battery materials such as nickel or lithium.

Japan is also approaching its Pacific neighbour Australia. Representatives from the two sides met in June, after which they agreed to hold future meetings to discuss development of a supply chain for crucial minerals that “does not depend on China”, a Japanese official overseeing the government’s mineral resource policy told Nikkei.

But Japan is not the only one hunting for nickel and lithium in these two countries. It also faces competition from South Korea, home to the biggest battery industry outside of China. South Korea has been quicker than Japan to establish a presence in both the Canadian and Australian mineral industries. As one expert noted, Japanese companies will have to shake their slow, “risk-averse” reputation if they want to catch up.

Suggested reads

1. Thai, Singapore tech firms surge in market value (Nikkei Asia)

2. China looks to relax cross-border data security controls (FT)

3. China’s green tech giants link supply chains to south-east Asia (Nikkei Asia)

4. Taiwan cultivates homegrown drone industry with eye on China (Nikkei Asia)

5. Taiwan unveils first locally built submarine in pushback against China (FT)

6. South Korea’s Hana Micron to invest $1bn in Vietnam chip production (Nikkei Asia)

7. India hits fantasy sports sector with back taxes in escalating battle (FT)

8. Indonesian ban on social media transactions deals TikTok major blow (FT)

9. Taiwan to probe 4 firms accused of helping Huawei build chip plants (Nikkei Asia)

10. VCs tell start-ups to delay IPO plans after Arm and Instacart underwhelm (FT)

#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

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