Taiwan Semiconductor Manufacturing Company (TSMC) has announced a major expansion of its presence in the United States, with plans to invest $65 billion in an Arizona factory over the next decade. This move is seen as a significant step forward for US President Joe Biden’s quest for security in the tech supply chain, but it also presents a complex balancing act for TSMC as it seeks to satisfy customers such as Nvidia while maintaining its highly profitable business model.
TSMC’s planned investment is part of a construction race in the US involving other global chipmakers such as Samsung and Intel, who are also taking big subsidies from Washington. However, producing chips for purposes such as AI still involves plants in Asia, reflecting the complexity involved in packaging various types of chip together to boost their performance and efficiency.
According to Myron Xie, an analyst at boutique consultancy SemiAnalysis, “It’s really not that simple to onshore everything. Having the logic [chip] foundry in the US and then a bit of the packaging there is not enough.” TSMC plans to start manufacturing 2-nanometer chips in the US in 2028, an upgrade from its previous plans. At that time, 2 nm technology is expected to be the latest in mass production worldwide, whereas previously the company had intended each new US fab to start operating with process technology one generation behind Taiwan. TSMC has also committed to offer a third plant using 2 nm or even newer technology by 2030.
The US government is providing hefty subsidies for TSMC’s upgrade, with $6.6 billion in grants and up to $5 billion in loans. This money comes from the 2022 Chips and Science Act, which aims to onshore advanced chipmaking for the US. Commerce secretary Gina Raimondo has said that the US will be on track to make about 20 percent of the world’s most advanced chips by the end of the decade.
TSMC’s decision to bring its latest technology to America is motivated not only by Washington’s money but also by the needs of Nvidia and other vendors of AI chips, which have become the most potent driver of global semiconductor demand. While TSMC will kick off 2 nm volume production in Taiwan next year, its original plans would have offered less powerful 3 nm chips only from 2028 in the US, putting it years behind the AI chip cycle, analysts said.
In conclusion, TSMC’s expansion into the US represents a significant step forward for the security of the tech supply chain, but it also presents a complex balancing act for the company as it seeks to satisfy its customers while maintaining its business model. The fact that producing chips for purposes such as AI still involves plants in Asia highlights the complexity involved in this industry, and the US government’s subsidies offer some incentive but are not enough on their own to achieve the desired results.