TSMC to Build Arizona Chip Plant as US China Tech Rivalry Escalates
TSMC to Build Arizona Chip Plant as US-China Tech Rivalry Escalates
TSMC is a major supplier to US tech giants such as Apple and Qualcomm, as well as Chinese firms like Huawei.
By Reuters | Updated: 15 May 2020 16:02 IST
While huge in terms of foreign investment in the United States, the plan is small by TSMC's standards
TSMC's US plant in Arizona will be a $12 billion investment
It is said to be one of the biggest foreign investment in the US
The chipmaker's new plant will create over 1,600 jobs
Taiwan Semiconductor Manufacturing Co (TSMC), the biggest contract chipmaker, said it plans to build a $12 billion (roughly Rs. 90,660 crores) factory in Arizona in an apparent win for the Trump administration's efforts to wrestle global tech supply chains back from China.
The plan, which will be one of the biggest inbound US investments on record and create over 1,600 jobs, comes as US President Donald Trump steps up criticism of Chinese trade practices and Beijing's handling of the novel coronavirus ahead of the November 3 US presidential elections.
Trump has long pledged to bring manufacturing back from overseas and now a steep economic slump brought on by the novel coronavirus is driving a government-wide push to end US production and supply chain dependency on China.
US Secretary of Commerce Wilbur Ross touted the deal as "another indication that President Trump's policy agenda has led to a renaissance in American manufacturing."
TSMC is a major supplier to US tech giants such as Apple and Qualcomm, as well as Chinese firms like Huawei, which Washington has put on a trade blacklist.
"This project is of critical, strategic importance to a vibrant and competitive U.S. semiconductor ecosystem that enables leading US companies to fabricate their cutting-edge semiconductor products within the United States," TSMC said.
While huge in terms of foreign investment in the United States, the plan is small by TSMC's standards. For 2020, TSMC's capex plan is $15 – 16 billion (roughly Rs. 1.13 lakh crores – roughly Rs. 1.20 lakh crores).
The Taiwanese chipmaker said the plan was to build the plant over nine years.
A US Commerce Department official said TSMC's decision to locate the plant in the United States generated "good will" at the department, the drafter of a law that would, if implemented, severely restrict TSMC chip sales to Huawei.
Credit Suisse analysts said proposed restrictions could threaten TSMC's 14 percent of sales from Huawei, escalate US – China tensions and delay the rollout of the next-generation 5G mobile network.
Shares of TSMC, the world's most valuable semiconductor company with a market capitalisation of $255 billion (roughly Rs. 19.26 lakh crores), exceeding Intel's, rose more than 1.5 percent on Friday morning, outperforming a 0.8 percent gain in the main Taiwan stock market.
"While it is hard to be certain, we believe that TSMC announcing a US Fab could remove the threat of further Huawei restrictions in the very near-term at least," JP Morgan analysts said in a note.
Advanced chips The plant, the biggest foreign investment by TSMC, will produce the most sophisticated 5 nanometre chips, which can be used in high-end defence and communications devices.
TSMC manufactures the bulk of its chips in Taiwan and has older chip facilities in China and Washington state.
Its chips power Apple's iPhones and the iPhone maker works closely with TSMC to become the first to take advantage of new advances in its chip-making processes.
US Secretary of State Mike Pompeo said chips from the new TSMC plant will power everything from artificial intelligence to 5G base stations to F-35 fighter jets.
Semiconductors play a key role in both consumer electronics and defence equipment. The vast majority of the most advanced chips are made in Asia, which has caused concern among US officials as a strategic rivalry with China deepens over the origins of the deadly coronavirus.
While Intel has major manufacturing operations in the United States, it supplies only its own chips rather than making them for outside customers.
The Trump administration has been in talks with both Intel and TSMC to build a plant in the United States, and Intel said last week it was in discussions with the Department of Defence about improving domestic sources for microelectronics and related technology.
The TSMC announcement is not expected to derail the Pentagon's efforts to bolster the supply chain for microprocessors, despite the Commerce Department's working on the TSMC deal independently, a person familiar with the matter said.
Apple and Intel declined to comment.
TSMC said that construction of the Arizona facility would begin in 2021 with production targeted to begin in 2024, and that it would be able to process up to 20,000 silicon wafers per month. Each wafer can contain thousands of individual chips. The investment will be made from 2021 to 2029.
The Wall Street Journal first reported the latest details of TSMC's plans.
Which is the bestselling Vivo smartphone in India? Why has Vivo not been making premium phones? We interviewed Vivo's director of brand strategy Nipun Marya to find out, and to talk about the company's strategy in India going forward. We discussed this on Orbital, our weekly technology podcast, which you can subscribe to via Apple Podcasts or RSS, download the episode, or just hit the play button below.