In this Supply Chain Matters posting, we highlight a rather significant reports indicating that Apple is considering sourcing of the chip fabrication of its advanced design semiconductor processers within the U.S. within a period of two years, and the industry implications from such a move.

 

Background

In prior Supply Chain Matters industry specific commentary focused on global semiconductor supply networks, we have called reader attention to the increased signs of long-term regional fab production shifts.

Major semiconductor customers and industry manufacturers, undertaking their own supply network resiliency evaluations, continue to elect to diversify fab production presence across major product demand regions.

Governments are additionally adopting legislation that views domestic semiconductor presence as a key fabric of economic, industrial and national defense policy, and now providing added incentives for fab and chip producers to source domestically where demand warrants. Such moves further have cascading effects on other value-added production including chip assembly, packaging and electronic component assembly.

Earlier this month, we highlighted reports indicating that advanced semiconductor device manufacturer and industry leader TSMC is considering investment in a second U.S. based fabrication facility. We specifically highlighted reporting from The Wall Street Journal indicating that the significance of the second potential fab investment were amplified by sources indicating the facility could be targeted for the manufacture of 3-nanometer based devices. These are the smallest and most technology advanced chips currently available, and for the most part, production has come directly from the chip maker’s Taiwan based facilities. Industry speculation was such that TSMC would continue to utilize its Taiwan base as the focal point for advanced fab capabilities.

 

Significant New Development

Earlier this week, Bloomberg reported that Apple is preparing to begin sourcing its internally designed advanced semiconductor processors from a fabrication plant under construction in Arizona and scheduled for opening in 2024, “making a major step toward reducing the company’s reliance on Asian production.”

That latter quoted statement has major industry significance, to state the least.

Apple CEO Tim Cook made the disclosure during an internal company meeting held in Germany as part of a European tour. He reportedly added that the consumer electronics giant will likely expand its supply of semiconductor chips from Europe as well. Bloomberg has separately reported that TSMC is in discussion with the government of Germany regarding the sourcing of a fab in that country.

Cook is further quoted as stating that: “Regardless of what you may feel and think, 60 percent coming out of anywhere is probably not a strategic position.

While there was no specific announcement of TSMC, the reality that the Taiwan based producer is Apple’s prime fab producer connects these two developments. This Bloomberg report specifically indicates:

Cook is likely referring to an Arizona factory that will be run by Taiwan Semiconductor Manufacturing Co., Apple’s exclusive chip-manufacturing partner. That plant is slated for a 2024 opening. And TSMC is already eyeing a second US facility, part of a broader push to increase chip production in the country.”

The Bloomberg report additionally points out that Apple has other U.S. based suppliers that manufacture electronic components. As an example, The Apple Mac Pro personal computer is produced within a Texas facility. Hence, the speculation of the downstream supply network implications.

Reportedly, neither Apple nor TSMC elected to comment on this Bloomberg report.

Added to this ongoing set of related developments are separate financial media reports indicating that according to regulatory filings, Warren Buffet’s Berkshire Hathaway has recently acquired more than $4.1 billion of stock in TSMC, characterized as a rare foray into technology stocks. Buffet has tended to shun major investments in industries and products because of not fully understanding the specific market. According to reporting by Reuters, the Hathaway investment news sent TSMC shares up almost 8 percent in Taiwan. Apple is reportedly the largest investment holding in Berkshire’s portfolio.

 

Added Perspectives

Obviously, nothing is certain until specific confirmations are made, and overall timing matches various technology and facility timetables.

The sheer high tech industry influence of an Apple, married with the ongoing changes in sourcing movements of the advanced semiconductor fabrication leader in volume and revenues, adds significance to the increased signs and movements toward more regionally based sourcing of advanced semiconductor production.

Once again, the implications for high tech, consumer electronics, smartphone and now automotive supply networks is that supply resiliency in chip fabrication and likely add-on supply network strategies are taking on a far different perspective in the coming two to four years. Be watchful and be prepared for the various industry implications.

 

Bob Ferrari

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