TSMC logo on a building

TSMC announces plans to build $12bn Arizona factory

Image credit: Dreamstime

The world’s largest contract chipmaker has announced its plans to build a $12bn factory in Arizona, in what could be a major victory for the US government’s efforts to reduce dependence on foreign manufacturing.

Earlier this week, reports emerged that the US government was in in talks with Taiwan Semiconductor Manufacturing Co and Intel about the possibility of building semiconductor foundries in the US. The US effort to reduce dependence on chipmaking factories based in China and other East Asian countries has intensified amid the US-China trade war, national security concerns and disruption to global supply chains caused by the Covid-19 pandemic.

TSMC previously indicated that it was actively considering US locations for a new factory, although it had “no concrete plan”. TSMC already has manufacturing operations in Taiwan, China, Singapore and the US (Washington State), as well as offices around the world. It is one of the world’s largest chipmakers and a pioneer of the foundry model, with its clients including Apple, Qualcomm, AMD and Nvidia, as well as some companies which already have their own chipmaking operations, such as Intel.

TSMC plans to invest in the new plant over a period of nine years with a view to providing more than 1,600 jobs. Construction will begin in 2021 with production beginning by 2024 at the earliest. The plant will produce the latest 5nm chips, which could be used in high-end defence and communications devices. Secretary of State Mike Pompeo said that chips at the plant would power AI devices, 5G base stations and F-35 fighter jets.

“This project is of critical, strategic importance to a vibrant and competitive US semiconductor ecosystem that enables leading US companies to fabricate their cutting-edge semiconductor products within the US,” said TSMC.

Despite the $12bn investment being an unusually large foreign investment in US manufacturing, the nine-year investment is less significant by TSMC’s standards: the company plans $15-16bn of spending in 2020 alone. Analysts suggested that the eventual scale “won’t be big” and may balance TSMC’s investment in China.

However, the announcement is good news for US President Donald Trump, who has attempted to bolster his credibility as an entrepreneur-president by bringing manufacturing back to American soil. US Secretary of Commerce Wilbur Ross characterised the deal as an indication that Trump has ushered in “a renaissance in American manufacturing”.

Pompeo said: “TSMC’s announcement comes at a critical junction, when China is competing to dominate cutting-edge technology and control critical industries. The TSMC facility in Arizona will increase US economic independence.”

Building a second factory in the US could have the side effect of causing TSMC to lose business from Huawei - the company currently provides chips for Huawei subsidiary HiSilicon - due to amended export rules proposed by the Trump administration which would require foreign companies which use US chipmaking technology to acquire a license before supplying to Huawei. Jefferies analysts said that Huawei has been hurrying to move its orders for the chips for one of its flagship smartphones from TSMC to Shanghai-based SMIC.

A previous much-heralded agreement by another Taiwanese electronics manufacturing giant to build a multibillion facility in the US could sound a note of caution. Plans to build a $10bn Foxconn plant in Wisconsin to manufacture TV and LCD panels were agreed with the offer of billions of dollars ($3-4.8bn) in subsidies, but many questions have been raised over repeated delays; the record-breaking size of the subsidies offered, and whether the factory would ever create the 13,000 jobs anticipated. The Wisconsin Legislative Fiscal Bureau estimates that investment in the plant will not be recouped until 2043 even under the best possible circumstances. Foxconn also has several "innovation centres" in Wisconsin which currently sit empty and unused.

Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.

Recent articles