Taiwan Semiconductor Manufacturing Company will more than triple its investment in the US state of Arizona, to $40 billion, as geopolitical tensions pressure the world’s largest chipmaker to ramp up diversification of its production facilities.
TSMC is currently putting $12 billion into building a manufacturing plant, or “fab,” in Arizona that was originally designed to make chips with a circuit width of 5 nanometers — the N5 generation that will be well behind the most advanced by the time the plant opens in 2024.
However, at an event on Tuesday marking the installation of the first chip tools at its Phoenix plant, the company will announce plans to create a second fab to manufacture more advanced 3nm or N3 chips starting in 2026, according to White House officials and people. Close to TSMC.
TSMC will also say it intends to make N4 chips, a slightly more advanced level, in the original factory originally intended for the N5.
In a speech at the event, US President Joe Biden is expected to authorize the additional investment as a sign that America can lead in manufacturing again and as an endorsement of his economic plan to boost domestic chip production and secure supply chains.
But industry experts said TSMC’s larger presence will still be unable to accommodate high-end products like the new iPhone models when the factory finally opens. They added that the investments could provide only minimal supply chain security, giving a stark reminder of the massive risks China would incur if it attacked Taiwan — where TSMC is headquartered and continues the bulk of its expansion.
The Biden Chips and Science Act passed in the summer, providing $52 billion in subsidies to US chipmakers and countering massive Chinese investment in its chip sector.
White House National Economic Council director Brian Dease said the US was making a “notable departure from the economic philosophy that has governed most of the past 40 years” in which the US government has cut taxes and regulations and has “grown out of the way” to a large extent.
“What you are seeing now is a dedicated industrial strategy that is laying the groundwork for mobilizing private investment . . . on a historic scale.”
Biden will be joined by several CEOs, including Apple’s Tim Cook, who will be a client of the Arizona company.
But Patrick Chen, head of research at CLSA in Taiwan, said, “If they fully expand Arizona, the proportion of US-made chips they can offer customers could be 15 percent of the total.”
Even if TSMC built a monthly capacity in Arizona of 120,000 silicon wafers from which the wafers are cut, it would compare to the four massive “fabs” the company already has in Taiwan.
“This will not isolate customers [from supply chain risk] “In the event of a complete turmoil in Taiwan,” said another expert in the chip industry, who asked not to be named. The person said that TSMC’s larger US factory would allow its customers to plan and prepare to make chips for their designs there and thus reduce “recovery time” in the event of a loss of Taiwanese capacity. Shifting chip production to a different industry can take several months.
Two industry executives said that part of TSMC’s capacity in America will be used on sensitive products such as supply chain components for US defense industries.
“TSMC’s presence in the United States will continue to follow the principle of N minus 1,” said a person close to the company, noting that any American fabricator will be one of the most advanced technology generation in production in Taiwan.
Industry executives and analysts said that trying to build the most advanced capacity outside of Taiwan would upend TSMC’s operating model.
“It wouldn’t make any economic sense,” Chen said. “The latest technology comes from their R&D center in Hsinchu and is put into risky production and finally mass production. [in the US] That would greatly inflate the cost. They will have no incentive to do so. So who will foot the bill? “
American factories producing one technology generation behind the most advanced, as planned now, said Felix Lee, an analyst at Morningstar, “allow them to make older iPad models or maybe an Apple Watch there, but certainly not iPhones from the latest production cycle.”
Apple’s next-generation iPhone will start to ramp up in the second half of next year and continue into 2024. But TSMC’s N3 chips, which these products need, will only become available in the US in 2026, which is when the chipmaker is expected to be It is already available. Moving to N2 in Taiwan.