Supply Chain Matters highlights added information regarding Taiwan Semiconductor Manufacturing Company’s (TSMC) expanded presence and investment in U.S. based semiconductor manufacturing.

Background

In early November, we updated our readers to reports indicating that the globe’s largest semiconductor fabrication producer, TSMC, was eying a second production presence in the U.S.. The manufacturer indicated in a statement at the time that:

In light of the strong customer demands we are seeing in TSMC’s advanced technology, we will consider adding more capacity in Arizona with a second fab based on operating efficiency and cost economic considerations.”

TSMC had already initiated plans to build an initial fab $15 billion facility in Arizona, and this second facility reportedly would have the same funding as that of the first and be located at the same location.  News of this potential fab investment was further amplified by indications that this second fab could be targeted for the manufacture 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.

In mid-November, we highlighted reports indicating that U.S. based consumer electronics provider Apple was considering sourcing of the chip fabrication of its advanced design semiconductor processors within the U.S. within a period of two years. The implications of this potential sourcing move were obviously significant from an overall industry and U.S. supply network perspective. While there was no specific mention or reference of TSMC, the reality that the Taiwan based producer is Apple’s prime fab producer fueled added speculation for these two developments.

A published Bloomberg report specifically indicated:

Cook (Apple CEO) s 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.

At the time, neither Apple nor TSMC elected to comment on Bloomberg reporting.

 

This Week’s Event

This week, President Joe Biden visited the Phoenix TSMC site and joined other dignitaries as part of a ceremony to celebrate the installation of the complement of chip fab production equipment for the initial facility announced two years ago.

In conjunction with President Biden’s attendance, the White House provided details for the second facility planned for this site.. Those details affirmed that the second fab is planned to produce 3-nanometer chip technology, the fastest and more sophisticated that is currently available. By the time this second facility is scheduled to open in 2026, the chip technology will have been subsumed by newer technology. The initial facility is scheduled to be operating in volume production in 2024, with 5-nanometer technology.

In his remarks the President indicated that TSMC is investing the sum of $40 billion for both planned facilities, representing a tripling of the original investment.

Reporting by azcentral indicates that the overall investments marks Arizona’s largest private-sector investment ever and one of the largest direct foreign investments anywhere in the United States. In addition to the two fabs, the designated site near Phoenix can accommodate four additional fabs.

Dr. Mark Liu, TSMC’s chairman, indicated that that: “This will be the greatest fab in the United States” adding that it will minimize water and energy waste, with minimal airborne emissions. A dedicated on-site water treatment and reclamation capability is reportedly planned for the facility. Liu additionally indicated that the Phoenix fab complex is expected to create upwards of 13,000 jobs, including 4,500 TSMC related and the remainder being local suppliers.

The White House further indicated that the President later met with a group of top high-tech industry executives that included Morris Chang and Mark Liu, Chairman of TSMC, Tim Cook, CEO of Apple, along with high level executives from Nvidia, Micron Technology, Advanced Micro Devices and ASML Holdings.

Apple CEO Tim Cook made remarks and affirmed his company’s partnership with TSMC, and that Apple looks forward to expanding the partnership as: “..TSMC forms new and deeper roots in America.” Cook later tweeted that Apple would be the Arizona site’s largest customer, which now, from our lens, confirms the motivations for TSMC’s added investment plans.

Nvidia CEO Jensen Huang indicated in a prepared statement that; “Bringing TSMC’s investment to the United States is a masterstroke and a game-changing development for the industry.”

 

Added Supply Chain Matters Perspectives

Reiterating our prior perspectives, this TSMC investment is hugely significant for high-tech equipment, consumer electronics and smartphone supply networks.

It adds to previous reports published in July indicating that Samsung was considering the construction of upwards of 11 new semiconductor fabrication production facilities in the Austin, Texas area over the next two decades.

The passage of the U.S. CHIPS and Science Act has been an obvious catalyst to these ongoing U.S. centric investment announcements from many additional global semiconductor industry players. In addition to a U.S. presence, TSMC is reportedly involved with investment discussions related to Japan and Europe, each involving government incentive considerations, and other chip producers continue to have similar discussions.

This is indeed added ongoing evidence of the likely regionalization of semiconductor, high tech and electronics supply networks, under the broad umbrella of industrial policy and national security.

Semiconductor production presence is indeed the new oil and industry supply  management teams need to continue to monitor how these developments continue to unfold in the coming months.

 

 

Bob Ferrari

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