In Arizona, a major win for the Trump administration has occurred. Taiwan Semiconductor Manufacturing Co., the world’s largest contract semiconductor foundry, announced that it plans to build an advanced chip foundry in the state, thanks to support from the U.S. federal government.
The announcement follows a Wall Street Journal report earlier this week that White House officials were in talks with TSMC and Intel to build foundries in the U.S., as part of its effort to reduce reliance on chip factories in Asia. Based in Hsinchu, Taiwan, TSMC provides chip components for many of the world’s largest semiconductor companies and its U.S. clients include Apple and Qualcomm.
The plant, scheduled to start production of chips in 2024, will enable TSMC’s American customers to fabricate their semiconductor products domestically. It will use the company’s 5-nanometer technology and is expected to create 1,600 jobs and have the capacity to produce 20,000 wafers a month.
The U.S.-China trade war, national security concerns, geopolitical unrest and the COVID-19 pandemic have all underscored the shortfalls of relying on foundries located abroad and international supply chains.
The U.S. government has reportedly been in talks with TSMC for months, though one sticking point for the company was the high cost of building a new foundry. TSMC chairman Mark Liu told the New York Times in October that the project would require major subsidies because it is more expensive to operate a factory in the U.S. than in Taiwan.
In today’s announcement, TSMC said, “U.S. adoption of forward-looking investment policies to enable a globally competitive environment for a leading edge semiconductor technology operation in the U.S. will be crucial to the success of this project.”
The company expects to spend about $12 billion between 2021 and 2029 on the project, with construction slated to begin next year.
TSMC already operates a foundry in Camas, Washington, and has design centers in Austin, Texas and San Jose, California.
Construction is planned to start in 2021 at an as-yet unspecified location in the city of Phoenix, which both Gov. Doug Ducey and Mayor Kate Gallego confirmed, with production targeted to begin in 2024.
The company’s total spending of roughly $12 billion will be spread from 2021 to 2029.
Gallego in a statement to The Arizona Republic said she and Chris Mackay, the city’s economic development director, traveled to Taiwan last year to make a pitch to the company.
She said her trip and the hard work from local and federal government agencies that worked on this for years — such as Phoenix, the Greater Phoenix Economic Council, Arizona Commerce Authority, and the U.S. Department of Commerce — were able to bring this project to Phoenix.
“Phoenix is the fastest growing city in the nation for many reasons. That expansion is not lost on both domestic and foreign companies looking for new operation centers,” Gallego said. “This project will undoubtedly change the landscape of our community in a huge, positive way. Phoenix is a global city operating on an international stage — this is yet another example of that.”
What is Taiwan Semiconductor Manufacturing?
Taiwan Semiconductor Manufacturing is a dominant, highly profitable semiconductor maker that was officially launched in 1987 by the Taiwanese government, electronics giant Philips and private investors.
The company’s shares trade on the U.S. stock exchange under the symbol TSM and have a stock-market capitalization, or value, of $260 billion, which easily eclipses the size of any Arizona-based corporation.
The company makes more than 10,700 products, employs more than 51,300 people and operates 16 factories, primarily in Taiwan but with a couple in China and one in Camas, Washington. Its design centers include those in Austin, Texas, and San Jose, California.
Taiwan Semiconductor generated $11.4 billion in net income on $35.8 billion in revenue in 2019.
North America accounted for 60% of revenues and China 20%, with the rest spread among other Asian nations.
The company’s “scale and high-quality technology allow the firm to generate solid operating margins, even in the highly competitive foundry business,” said investment researcher Morningstar.
✳️Big News ✳️@TWSemicon is building its new semiconductor facility in PHOENIX! We’re thrilled to continue work w/ them. Will create over 1,600 high-tech jobs & 1000’s more. 2021 construction planned. This brings $12B capital expenditure. PHX is the future! https://t.co/wMIJWh6lpN
— Mayor Kate Gallego (@MayorGallego) May 15, 2020
Possible political risk
The company said its plans for the advanced semiconductor fabrication plant came with the “mutual understanding and commitment to support from the U.S. federal government and the state of Arizona.”
But Abhinav Davuluri, an investment strategist at Morningstar, noted that the construction of advanced fabs such as this is an expensive, multiyear process that comes with some uncertainty.
“The current geopolitical climate and trade tensions between the U.S. and China could serve as a catalyst or deterrent to TSMC’s fab plans in the U.S. should a resolution be reached or a less hawkish administration take over after the U.S. election in November,” he cautioned, “So we think there is a scenario in which this fab does not get built.”
Assuming it is built, the planned facility will use the company’s 5-nanometer technology for semiconductor wafer fabrication, have a capacity for 20,000 semiconductor wafers per month and create 1,600 high-tech professional jobs, while supporting thousands of additional indirect jobs, the company said.
Taiwan Semiconductor described its 5-nanometer production capabilities as the most advanced in the world.
“This U.S. facility not only enables us to better support our customers and partners, it also gives us more opportunities to attract global talents,” the company said. “This project is of critical, strategic importance to a vibrant and competitive U.S. semiconductor ecosystem,” allowing U.S. firms to fabricate their cutting-edge semiconductor products within the country.
Taiwan Semiconductor cited “forward-looking investment policies” in the U.S. and a talented workforce here as important considerations.
‘A big win for Arizona’
The Governor’s Office on Thursday night confirmed Taiwan Semiconductor’s plans to build in Arizona, saying the Arizona Commerce Authority is working with the city of Phoenix and the Greater Phoenix Economic Council to assist the company as it finalizes all aspects of the project.
“I’d like to thank TSMC Chairman Dr. Mark Liu for his commitment to Arizona. We are honored to be selected for this project and look forward to building a collaborative long-term relationship with TSMC,” Ducey said.
Beyond thanking the company, authorities said little, because it remains an active economic development project.
“TSMC coming to Arizona is a big deal!” said Don Tolliver, a retired semiconductor engineer, now 81 and living in Phoenix. Tolliver said he worked in the Valley for Motorola Semiconductors for 36 years.
“This is a big win for Arizona and high tech in this state,” Tolliver said in an email to The Republic, adding that he has long been familiar with TSMC and has “a lot of respect for their capabilities.”