TSMC triples Arizona chip investment to $40 billion

Taiwan Semiconductor Manufacturing Company to more than triple its investment in the US state of Arizona to $40 billion as geopolitical tensions push the world’s largest contract chipmaker to accelerate the diversification of its production facilities .

TSMC is currently investing $12 billion in building a manufacturing or “fab” facility in Arizona that was originally designed to manufacture chips with theoretically 5 nanometer circuit widths – an N5 generation that will be behind the most advanced when the fab opens in 2024.

However, at an event on Tuesday marking the installation of the first chip tools at the Phoenix factory, the company will announce plans for a second factory that will manufacture more advanced 3nm or N3 chips from 2026, according to sources. White House officials and people. close to TSMC.

TSMC will also say that it intends to manufacture N4 chips, a slightly more advanced level, in the fab originally planned for N5.

In a speech at the event, US President Joe Biden is expected to trumpet the additional investment as a sign that America can once again lead manufacturing and as an endorsement of his economic plan to boost domestic production of chips and securing supply chains.

But industry experts said TSMC’s larger presence still won’t be able to accommodate cutting-edge products like new iPhone models when the fabs finally open. They added that the investments could only provide minimal supply chain security, starkly reminding of the immense risks involved should China attack Taiwan – where TSMC is headquartered and continues most of its expansion.

Biden’s Chips and Science Act passed this summer, providing $52 billion in subsidies to U.S.-based chipmakers and countering massive Chinese investment in its own chip industry.

White House National Economic Council director Brian Deese said the United States was “markedly departing from the economic philosophy that has governed for much of the past 40 years” in which the U.S. government has cut taxes and regulations and got largely “out of the way”. .

“What you see now is a dedicated industry strategy laying the groundwork to attract private investment. . . on a historic scale,” he added.

Biden will be joined by several CEOs, including Apple’s Tim Cook, who will be a client of the Arizona fabs.

But Patrick Chen, head of research at CLSA in Taiwan, said: “If they fully accelerate Arizona, the proportion of US-made chips they could provide to customers would be maybe 15% of the total.”

Even if TSMC were to build a monthly capacity in Arizona of 120,000 silicon wafers from which chips are cut, that would compare to the four such “mega fabs” the company already has in Taiwan.

“It will not isolate customers [from supply chain risk] in the event of a complete disruption of Taiwan,” said another chip industry expert who asked not to be named. The person said a larger TSMC factory in the United States would allow customers to plan and prepare to have chips made to their designs there and thus reduce “recovery time” in the event of loss. capacity based in Taiwan. Transferring chip production to another factory can take several months.

Two industry executives said some of TSMC’s capacity in America would be used for sensitive products such as components for the US defense industry supply chain.

“TSMC’s presence in the US will continue to follow the principle of N minus 1,” a person familiar with the company said, noting that any US factory would be one technological generation behind the most advanced production in Taiwan.

Industry executives and analysts have said trying to build the most advanced capability outside of Taiwan would upend TSMC’s operating model.

“It wouldn’t make economic sense,” Chen said. “The latest technology comes out of their research and development center in Hsinchu and is put into production at risk and finally into mass production. Reproduce that [in the US] would significantly inflate costs. They would have no incentive to do so. So who would foot the bill? »

US factories producing a generation of technology behind the most advanced, as expected now “allow them to make legacy model iPads or maybe the Apple Watch there, but certainly not iPhones of the latest product cycle”, a said Morningstar analyst Phelix Lee.

Apple’s next generation of iPhones will start to rise in the second half of next year and continue into 2024. But TSMC’s N3 chips, which these products require, will only be available in the United States. in 2026, by which time the chipmaker should already be moving into N2 in Taiwan.

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