In a big shift to their manufacturing operations – and a big political win domestically – TSMC has announced that the company will be building a new, high-end fab in Arizona. The facility, set to come online in 2024, will utilize TSMC’s soon-to-be-deployed 5nm process, with the ability to handle 20,000 wafers a month. And with a final price tag on the facility expected to be $12 billion, this would make it one of the most expensive fabs ever built in the United States.

Operating over a dozen fabs across the globe, TSMC is responsible for a significant share of global logic chip production, particularly with leading-edge and near-leading-edge processes. The company has become perhaps the biggest winner amidst the gradual winnowing of fabs over the past two decades, as manufacturer after manufacturer has dropped out, consolidating orders among the remaining fabs. And with GlobalFoundries dropping out of the race for cutting-edge manufacturing nodes, TSMC is one of only three companies globally that's developing leading-edge process nodes – and one of the only two that’s a pure-play foundry.

This success has become both a boon and a liability for TSMC. Along with Korean rival Samsung, the two companies have seen massive growth in revenues and profits as they have become the last fabs standing. As a result, TSMC serves customers both locally and globally, particularly the United States and China, the two of which are not enjoying the best of relations right now. This leaves TSMC trapped in the middle of matters – both figuratively and literally – as China needs TSMC to produce leading-edge chips, and the United States is now increasingly reliant on TSMC as well following GlobalFoundries’ retreat.

As a result, the Taiwan Semiconductor Manufacturing Company is going to do something it’s never done before, building a near-leading-edge fab in the US, outside of its home base of Taiwan. The new facility, set to be constructed in Arizona, will use the company’s 5nm process, which is currently TSMC’s most advanced manufacturing process. And while this will no longer be the case by the time it comes online in 2024, when 3nm processes are likely to be available, it would still make the Arizona facility among the most advanced fabs in the world, and by far the most advanced contract fab in the United States.

The Arizona facility would be joining TSMC’s other US fab, which is located in Camas, Washington. It, like TSMC’s other non-Taiwanese-fabs, is based around older technologies, with the Camas fab in particular focusing on building flash products using relatively large process nodes (350nm to 160nm). As a result, the Arizona fab represents a significant shift for TSMC; it’s not the first US fab for the company, but it’s the first time TSMC has built such an advanced fab in another nation.

All told, the Arizona fab is set to be a medium-sized facility – a “megafab” in TSMC parlance – despite its use of an advanced manufacturing node. The 20,000 wafers per month throughput of the fab is well below TSMC’s largest “gigafabs” in Taiwan, which can move more than 100,000 wafers per month. As a result while the fab will add to TSMC’s 5nm capacity, it won’t become a massive part of that capacity. Though with an expected price tag of $12 billion, it will still be a very expensive facility to build.

According to TSMC, the primary impetus for building the fab – and especially to build it in the United States instead of Taiwan – is specifically to have high-end production capacity within the United States. With GlobalFoundries dropping out of the race for leading-edge nodes, the US government and other sensitive fabless chip designers are in want of another leading-edge facility within the US to build their chips. Given their location, TSMC’s Taiwanese fabs are seen as security risk, and the US would prefer to be self-reliant rather than relying on a foreign partner – a concern that’s been magnified by the current coronavirus pandemic and the supply chain issues that has created.

The end result is that while the fab is not explicitly reserved for military and other sensitive chips, it’s hard to imagine a scenario where the big commodity chip manufacturers such as AMD and Qualcomm don’t continue to use TSMC’s larger and more efficient fabs in Taiwan. In other words, while the Zen processor you’re playing World of Tanks on isn’t likely to come from Arizona, the chip that goes into an actual tank just might. Unaspiringly then, the planned Arizona fab comes with a lot of interest and support from both Arizona and the US Government, for both strategic and business reasons.

Interestingly, while the desire for more domestic fabs within the US has been well known, the US’s two major domestic fabs find themselves on the outside looking in with this deal. Intel has long tried to lure customers to its own contract manufacturing business, including making pitches to the US government, with little luck. Meanwhile GlobalFoundries is currently the US government’s preferred fab for military hardware – inheriting those fabs and the resulting business from IBM – but whom faces the prospect of slowly losing business as government customers switch to newer manufacturing processes. So in some respects it’s a bit surprising to see outsider TSMC land such a deal, though there are sizable political concerns involved as well.

At any rate, TSMC’s Arizona fab is expected to break ground in 2021, with completion scheduled for 2024. At which point it is anticipated to employ over 1600 workers as TSMC becomes the United States’ second leading-edge foundry provider.

Source: TSMC

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  • peevee - Tuesday, May 19, 2020 - link

    Cost of capital is not the same though. Lower risks means cost of capital are lower. Reply
  • FunBunny2 - Wednesday, May 20, 2020 - link

    "Cost of capital is not the same though. Lower risks means cost of capital are lower."

    true, assuming one can accurately measure 'risk', but irrelevant. my point is that capital moves the world around with the click of a mouse. for any given level of 'risk', any entity in any country gets the moolah and, through the miracle of arbitrage, all opportunities at this level of 'risk' will pay the same amount, irregarless of location. yes, some holders of moolah assign some level of added 'risk' if the country is a democracy rather than an autocracy. cf. China.
    Reply
  • GreenReaper - Saturday, May 16, 2020 - link

    Foxconn is a fox. TSMC is . . . some kind of mecha? You can't really compare.
    Or maybe they could use Taipai's bear mascot: https://focustaiwan.tw/culture/201709260023
    Reply
  • brucethemoose - Friday, May 15, 2020 - link

    The US has courted TSMC before though...

    Maybe the Taiwanese govt has something to do with it? I think TSMC kinda like Samsung, where they take up such a large fraction of the GDP that government interest is a given.
    Reply
  • Kangal - Saturday, May 16, 2020 - link

    That's true.
    Though I think the growing frustration of Taiwan against China is the big culprit. It's not just the spying and human rights violations, or the manipulation of information and unfair practices, but the combination of all of them. The bad response from China in the trade war, and the Covid19, has really pushed Taiwan away. Just like it has for Singapore, Hong Kong, and Malaysia.
    Reply
  • Santoval - Saturday, May 16, 2020 - link

    TSMC basically send a message to Beijing that they are getting into bed with the Americans, so "don't frack with us". Reply
  • wilsonkf - Sunday, May 17, 2020 - link

    TSMC has two fabs in China. Reply
  • Eliadbu - Thursday, May 21, 2020 - link

    They are both insignificant in terms of node and capacity probably even less important than this planned fab. Reply
  • imaheadcase - Friday, May 15, 2020 - link

    Just for reference people have been saying that EVERY YEAR since Taiwan was on its own. So yah don't expect it to happen. Especially considering having a factory "out of reach" of china doesn't quite work that way..if china did do that its not like the plant is going to stay up and running with no resources from Taiwan coming in..aka money. lol

    Never mind the fact the the plants in Taiwan would be destroyed, China has over 1300 missles pointed at major areas in Taiwan. That is enough to make Taiwan completely void of life.
    Reply
  • Operandi - Friday, May 15, 2020 - link

    Who says TSMC has to stay in Taiwan?

    Destroyed??!!? WTF dude.... China wants the technology and resources not the island. China will come for Taiwan when their hard and soft power has reached sufficient level and they are pretty much there now. Hopefully no guns or missiles need to be fired in the process of taking it.
    Reply

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