The world’s leading contract chip maker Taiwan based TSMC has started building a second fab in Arizona, investing $40 billion collectively for the two facilities and beefing up the US domestic semiconductor sector.

Andrew Wooden

December 7, 2022

5 Min Read
TSMC is building a second chip fab in Arizona as part of $40 billion commitment

The world’s leading contract chip maker Taiwan based TSMC has started building a second fab in Arizona, investing $40 billion collectively for the two facilities and beefing up the US domestic semiconductor sector.

The first Arizona fab, or semiconductor factory, is scheduled to begin production of N4 process technology in 2024, while this freshly announced second facility is intended to spin up cutting edge 3nm process technology – which is key for smartphones – in 2026.

The combined amount of wedge Taiwan based TSMC is pouring into both facilities is $40 billion – which the firm says represents one of the largest foreign direct investments in the history of the US. TSMC Arizona’s two fabs will apparently create 10,000 ‘high-paying high-tech jobs’ and will manufacture over 600,000 wafers per year, with estimated end-product value of more than US$40 billion.

The Arizona arm of the chip firm is also planning an on-site Industrial Water Reclamation Plant that when finished will allow the sites to achieve ‘near zero liquid discharge’ – whatever that might mean.

The announcement ceremony yesterday had a high calibre guestlist, including US President Joe Biden and various other politicians, and tech leaders including AMD CEO Dr Lisa Su, Nvidia CEO Jensen Huang, and Apple CEO Tim Cook.

It’s been reported that Cook has already confirmed Apple would buy processors made in a new fab, and said at the launch: “And now, thanks to the hard work of so many people, these chips can be proudly stamped Made in America. This is an incredibly significant moment… Today is only the beginning. Today we’re combining TSMC’s expertise with the unrivalled ingenuity of American workers. We are investing in a stronger brighter future, we are planting our seed in the Arizona desert. And at Apple, we are proud to help nurture its growth.”

While president Biden reportedly added: “Apple had to buy all the advanced chips from overseas, now they’re going to bring more of their supply chain home. It could be a game-changer.”

TSMC Chairman Dr Mark Liu said: “When complete, TSMC Arizona aims be the greenest semiconductor manufacturing facility in the United States producing the most advanced semiconductor process technology in the country, enabling next generation high-performance and low-power computing products for years to come. We are thankful for the continual collaboration that has brought us here and are pleased to work with our partners in the United States to serve as a base for semiconductor innovation.”

It now seems obligatory to tie any new technology announcement with some sort of green messaging, but the real significance here is the leading chip maker in the world placing more of its chips – pardon the pun – onto US soil, at a time when Taiwan – where its main operations are – is under increasing provocation from China.

A doomsday scenario as tensions in the region increase would involve an annexation of the island state by Chinese forces, which as well as the humanitarian crisis such an invasion would create, could also cut off the rest of the world from the current best source of cutting edge microchips, which underpin so many industries.

Tensions are further exacerbated by US export restrictions around key technologies, which has been described as a move to stifle Chinese ambitions in the semiconductor space and other tech sectors.

Along these grim lines, TSMC founder Morris Chang reportedly said at the launch that globalization is almost dead: “Twenty-seven years have passed and [the semiconductor industry] witnessed a big change in the world, a big geopolitical situation change in the world. Globalization is almost dead and free trade is almost dead. A lot of people still wish they would come back, but I don’t think they will be back.”

It’s not just about geo-politics though, part of the supply chain strains are a consequence of the proliferation of IoT devices, and the fact all sorts of sectors are using chips that did not need them before. As Dell said in an interview with Telecoms.com: “We need more capacity basically everywhere on the planet… it’s more than IT goods and services now, it’s everything from watches to thermostats – the automobile is an incredibly complex computer at this point. But what we’re experiencing really is shortages of integrated circuits.”

Whether it’s more to do with international rivalry or the supply chain issues – which were not helped by the chaos that came out of global covid lockdowns – there is clearly a huge desire by the US to ramp up its domestic production, with government legislation being rolled out designed to do just that.

In August, US chip firm Intel entered into a partnership with investment firm Brookfield to jointly fund the expansion of semiconductor manufacturing centres in the US. The two firms will jointly create a warchest of up to $30 billion which will be invested in Intel’s domestic chip making capabilities, paying for the expansion of Intel’s Ocotillo campus in Chandler, Arizona, with Intel funding 51% and Brookfield funding 49% of the total project cost.

In the same month, South Korean consumer electronics giant Samsung announced it plans to invest about KRW 20 trillion ((around $16 billion) by 2028 to set up a 109,000 square meter facility within its Giheung campus, which will crank out advanced research on next-generation devices and processes for memory and system semiconductors, and develop ‘new technologies based on a long-term roadmap.’

And in the UK, The Department for Digital, Culture, Media and Sport (DCMS) this week commissioned some research looking at the feasibility of some new national initiatives which have the ultimate goal of growing the UK’s semiconductor industry. Items on the table for consideration include whether better access to prototyping and manufacturing facilities for chip firms would help, making specialist software tools more readily available for start-ups, and how to develop ‘cutting-edge packaging processes’, or the point in the supply chain where chips are prepared for use.

Whether countries like the UK will play a significantly larger role in the semiconductor market in the future, or the gigantic amounts of investment required to set these fabs up continues to gravitate to what seems to be the US hub of Arizona, time will tell. You can imagine, however, that there would be cheaper and easier solutions to the problem if Washington and Beijing had some sort of breakthrough in relations and the rivalry was taken out of the equation – but depressingly the momentum seems to be travelling in the other direction in that regard.

 

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About the Author(s)

Andrew Wooden

Andrew joins Telecoms.com on the back of an extensive career in tech journalism and content strategy.

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