After years of planning, building, geopolitical wrangling, and workforce challenges, the world’s largest semiconductor foundry, Taiwan Semiconductor Manufacturing Co. (TSMC) is officially starting mass production at an advanced chip-manufacturing facility in Phoenix in 2025. The fab represents the arrival of advanced chip manufacturing in the United States and a test of whether the 2022 CHIPS and Science Act can help stabilize the semiconductor-industry supply chain for the United States and its allies.
In late October 2024, the company announced that
yields at the Arizona plant were 4 percent higher than those at plants in Taiwan, a promising early sign of the fab’s efficiency. The current fab is capable of operating at the 4-nanometer node, the process used to make Nvidia’s most advanced GPUs. A second fab, set to be operational in 2028, plans to offer 2- or 3-nm-node processes. Both 4-nm and more advanced 3-nm chips began high-volume production at other TSMC fabs in 2022, while the 2-nm node will begin volume production in Taiwan this year. In the future, the company also has plans to open a third fab in the United States that will use more advanced technology.
The chip-manufacturing giant is currently set to receive US $6.6 billion in CHIPS Act funding for building the first Arizona plant. But government funding isn’t the only reason semiconductor manufacturing is coming back to the United States. TSMC makes 90 percent of the world’s advanced chips, and U.S.-based companies including Apple, Nvidia, Google, Amazon, and Qualcomm rely on them. The chip shortages during the economic shock of the early COVID years, and Chinese president Xi Jinping’s increasingly aggressive rhetoric about Taiwan, have made TSMC’s customers and international policymakers uncomfortable.
TSMC announced their intention to invest in Arizona in 2020. “The CHIPS Act didn’t make it happen—companies have largely moved on their own,” says TechInsights semiconductor analyst
Dan Hutcheson. Big customers like Apple have been pushing TSMC to build fabs elsewhere to minimize risk, he says.
Hutcheson says having TSMC fabs outside Taiwan is good for the company’s customers and good for Taiwan. The island’s “
silicon shield” against China has done its work—TSMC’s dominance in advanced chip manufacturing gives the United States and other countries a reason to support Taiwan. But going forward, Hutcheson says the shield could turn into a target. If the United States and its allies are increasingly dependent on chips made only in Taiwan, then China can cause major damage to the U.S. economy by targeting Taiwan. Hutcheson says TSMC’s geographical diversification will make its home country less of a target. The company has also opened a fab in Japan and is building one in Germany.
TSMC’s Workforce Issues
Reaction to the Arizona fab in Taiwan has been mixed. An investigation published in
Rest of World in April 2024 featured American workers sent to Taiwan to train for a year complaining about poor working conditions and inadequate training; in the same article, Taiwanese workers complained that Americans are arrogant and don’t have the work ethic for a semiconductor fab.
“TSMC is operated like a military organization. Decisions are top-down and you are not to ask questions,” says University of Chicago economics professor
Chang-Tai Hsieh, who once worked at the company.
On the other hand, many American engineers espouse the Silicon Valley attitude of “move fast and break things,” says
Jason Hsu, a former legislator in Taiwan who is now a specialist in the Indo-Pacific technology industry at the Hudson Institute, a Washington, D.C., think tank. But that’s not an easy fit with a process that can be disrupted by a single speck of dust.
Hutcheson says these kinds of culture clashes are to be expected—and he says TSMC seems to have worked through them. The problem may have been that the company set unrealistic goals and timelines. TSMC saw building a fab in the United States “as a simple technology problem,” says Hutcheson. “They see it as a skill set that’s universal, but it’s not universal. It’s very culturally and legally dependent.” Each city in the United States may have different building codes and permitting processes, for instance—and that’s different from how things work in Taiwan, he says. As more fabs open, the United States is also
facing a shortage of engineers and technicians.
Intel’s and Samsung’s Fab Plans
TSMC is not the only company planning to open an advanced fab in the United States with support from the CHIPS Act.
Samsung is also set to receive $6.4 billion in potential funds to open a fab in Taylor, Texas, but the company has delayed production from the second half of 2024 to a possible opening in 2026. Hsieh says culture clash is the least of Samsung’s problems. The company doesn’t have enough customers for the chips it makes in South Korea, and there will not be demand for chips that it might make—likely at higher cost—in Texas, says Hsieh.
Intel was one of the biggest lobbyists for the CHIPS Act, and has been pursuing a revival of its foundry business since former CEO Pat Gelsinger was appointed to the position in 2021. Intel’s technology has fallen behind, and, like Samsung, the company is struggling to find enough customers. However, Intel is planning to open new sites in the United States. An expected $8.5 billion in direct CHIPS Act funds will go toward building advanced fabs in Arizona and Ohio; converting two fabs in New Mexico into packaging facilities; and purchasing the next generation of extreme-ultraviolet lithography equipment for the company’s Oregon facilities.
At the time of publication, it remains unclear how the Trump administration might seek to alter implementation of the CHIPS Act. Pending any major changes, the opening of TSMC’s Arizona fab will be a test both of the ability of the CHIPS Act to stimulate domestic manufacturing and of the company’s international expansion, says Hutcheson. “What’s going on in Phoenix is quite amazing,” he says.
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