TSMC To Kick Off 3nm Chip Production In the U.S. From Its $12B Arizona Chip Fab
This is TSMC’s first major venture in the U.S. since the White House signed the CHIPS and Science Act into law in August 2022.
Taiwan Semiconductor Manufacturing Company (TSMC) will reportedly expand its multi-billion chip fabrication unit in Arizona. The company’s founder and CEO, Morris Chang, said the new facility would manufacture advanced 3 nm node chips.
TSMC, the world’s largest contract semiconductor manufacturer responsible for more than half of the global output, is in the final stages of finalizing a phase two expansion of its under-construction manufacturing facility in Phoenix, Arizona.
“It has almost been finalized— in the same Arizona site, phase two. Five-nanometer is phase one, 3-nanometer is phase two,” Chang told the press in Taipei, Taiwan, as reported by Reuters.
Construction for the 5 nm Arizona plant venture is expected to cost TSMC $12 billion, which is part of the company’s $44 billion capital expenditure budget for 2022, announced in January this year during the company’s Q4 2022 earnings call. Previously in April 2021, TSMC announced a $100 billion investment to expand production capacity globally over the succeeding three years.
However, this is the first major venture TSMC would be undertaking in the U.S. since the U.S. Congress passed the CHIPS and Science Act and the White House signed it into law in August 2022. The legislation has kicked off an American gold rush, except with chips, and is not only reinvigorating the U.S. manufacturing capacity but also pulling back opportunities lost to the orient in the previous decades.
An increasing Chinese military threat over Taiwan, which the former considers a province, would also reduce the U.S.’s reliance on what has emerged as an economic and geopolitical competitor. Presently, 70% of the semiconductors are sourced from Taiwan (63%) or China (7%).
An expansion into the U.S. would also help TSMC to compartmentalize its business while benefiting from production and R&D incentives, tax credits, etc., all the same. Moreover, investing in the U.S. is a necessity for TSMC, whose reasons go beyond geopolitics and incentives. “I not only believe, but know for a fact that the cost of manufacturing chips in the US will be at least 55% higher than in Taiwan,” Chang said.
“But that does not mitigate against moving some capacity to the US. The chip manufacturing process we moved over is the most advanced of any company in the US, and that is very important to the US.” TSMC claims its 3 nm node is 15% faster, 30% more efficient, and offers up to 70% higher logic density than its predecessor.
See More: Loss of Access to Taiwan’s Chips May Kickstart a Recession, Commerce Secretary Warns
In order for the company to ensure it maintains the lion’s share of global chip fabrication, TSMC would need access to the 3 nm and related technology, whose exports the U.S. government banned just a week after the CHIPS Act was signed.
The U.S. government instituted export controls on four technologies, viz., gallium oxide and diamond-based substrates of ultra-wide bandgap semiconductors, electronic computer-aided design (ECAD) software used in the development of integrated circuits with gate-all-around field-effect transistor (GAAFET) structure, pressure-gain combustion (PGC) technology used in rockets and other hypersonic systems Section 1758 of the Export Control Reform Act (ECRA).
Now, TSMC surprisingly announced that its 3 nm nodes would leverage the FinFET structure instead of the GAAFET. However, lack of access to GAAFET, an advanced U.S. semiconductor tech that the company announced it would use for 2 nm in chips, could thus derail TSMC’s dominant market position.
TSMC or any other company from any country coming under the Wassenaar Arrangement is forbidden to transfer or sell the 3 nm tech in non-Wassenaar countries such as China. Chips are dual-use goods and technologies and are ubiquitously used in conventional weapons such as missiles, aircraft, ships, etc., and come under the arms control agreement.
TSMC, which sold a $4.1 billion stake to Warren Buffett’s Berkshire Hathaway this week, could have thus taken its business to any other country under the Wassenaar Arrangement instead of the U.S. However, none bar South Korea has the semiconductor supply chain that can support the scale of TSMC’s operations. Additionally, the $52 billion CHIPS Act sweetens the decision.
Companies that receive federal funding under the CHIPS Act must also adhere to certain restrictions. These include the inability to spend capital on developing advanced factories in China, producing chips for the American market, or conducting business in China for ten years. The U.S. Department of Commerce is expected to share all prohibitions by February 2023.
Arizona is also the location of Intel Foundry Service’s new $20 billion unit. The company will manufacture Intel 3 (5 nm) and Intel 20A (1 nm = 10 Å, first from the Angstrom era) chips in Arizona.
According to a Bloomberg report, Apple will source the 3 nm chip from Arizona. The iPhone maker is rumored to shift its M2 (Macs) and A17 (iPhone) chips to the 3 nm node.
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