Taiwan Semiconductor Manufacturing Company will more than triple its investment in the US state of Arizona to $40bn, as geopolitical tensions put pressure on the world’s largest contract chipmaker to step up diversification of its production facilities.
TSMC is currently putting $12bn into construction of a fabrication plant or “fab” in Arizona that was originally designed to make chips with notionally 5 nanometre circuit widths — an N5 generation that will be behind the most advanced one by the time the fab opens in 2024.
However, at an event on Tuesday marking the installation of the first chip tools at the Phoenix plant, the company will announce plans for a second fab which will manufacture more advanced 3nm, or N3 chips, from 2026, according to White House officials and people close to TSMC.
TSMC will also say that it intends making N4 chips, a slightly more advanced level, in the fab originally intended 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 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 the larger TSMC presence would still be unable to accommodate cutting-edge products such as new iPhone models when the fabs finally open. They added the investments could provide only minimal supply chain security, giving a stark reminder of the immense risks incurred if China attacked Taiwan — where TSMC is headquartered and continues the bulk of its expansion.
Biden’s Chips and Science Act was passed in the summer, providing $52bn in subsidies for chipmakers based in the US and countering China’s massive investments in its own chip sector.
White House National Economic Council director Brian Deese said the US was making a “marked departure from the economic philosophy that has governed for much of the last 40 years” in which the US government cut taxes and regulation and largely “got out of the way”.
“What you’re seeing is now a dedicated industrial strategy laying the foundation to crowd in private investment . . . at historic scale,” he added.
Biden will be joined by several chief executives, including Tim Cook from Apple, which will be a customer for the Arizona fabs.
But Patrick Chen, head of research at CLSA in Taiwan, said: “If they fully ramp Arizona, the proportion of US-made chips they could provide to customers would be maybe 15 per cent of the total.”
Even if TSMC built a monthly capacity in Arizona of 120,000 silicon wafers from which chips are cut, it would compare with four such ‘mega fabs’ the company has in Taiwan already.
“This won’t insulate customers [from supply chain risk] in case of a full Taiwan disruption,” said another chip industry expert who asked not to be named. The person said a larger TSMC fab in the US would allow its customers to plan and prepare for having chips made to their designs there and thus cutting “recovery time” in case Taiwan-based capacity is lost. Shifting chip production to a different fab can take many months.
Two industry executives said part of TSMC’s capacity in America would be used for sensitive products such as components for the US defence industry supply chain.
“TSMC’s US presence will continue to follow the principle of N minus 1,” said a person close to the company, indicating that any US fab would be one technology generation behind the most advanced in production in Taiwan.
Industry executives and analysts said that trying to build the most advanced capacity outside Taiwan would overturn TSMC’s operations model.
“It would make no economic sense,” Chen said. “The latest technology comes out from their research and development centre in Hsinchu and is put into risk production and finally mass production. Replicating that [in the US] would significantly inflate cost. They wouldn’t have any incentive to do so. So who would pick up the bill?”
US plants producing one technology generation behind the most advanced, as planned now “allows them to make legacy model iPads or maybe the Apple Watch there, but certainly not iPhones from the latest product cycle,” said Phelix Lee, an analyst at Morningstar.
Apple’s next iPhone generation will begin ratcheting up in the second half of next year and continue in 2024. But TSMC’s N3 chips, which those products need, will become available in the US only in 2026, by which time the chipmaker is expected to already be moving into N2 in Taiwan.
Source: Economy - ft.com
