Unlock the Publisher’s Digest for free
Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
The world’s largest chipmaker, Taiwan Semiconductor Manufacturing Co, has agreed to make its most advanced products in Arizona starting in 2028, in a boost to the White House’s efforts to bring semiconductor manufacturing domestically.
TSMC will produce the latest cutting-edge 2-nanometer chips at a fabrication plant, or fab, it is building in Phoenix, Arizona, marking an upgrade from its previous plans.
That facility will be the company’s second in the United States. The first, also in Arizona and announced in 2020 under the Trump administration, will begin production next year.
TSMC also said on Monday it will increase its total investment in the United States from $40 billion to $65 billion to build a third factory, with 2nm or even more advanced technology, that will be operational by 2030.
The Taiwanese company and the US Commerce Department said on Monday that Washington will provide it with support worth $6.6 billion in grants and up to $5 billion in loans.
The subsidies are part of the Chips Act, passed in 2022 to boost chip manufacturing in the United States. Last month, the Biden administration unveiled a deal for $8.5 billion in grants and up to $11 billion in loans for Silicon Valley’s Intel, which promised $100 billion in new investments.
TSMC’s commitment helps the White House reach its goal of bringing 20% of the world’s advanced semiconductor production onshore by 2030.
Growing fears of a Chinese invasion of Taiwan, where 90% of cutting-edge chips are currently produced, have prompted the United States to step up efforts to boost domestic semiconductor production.
“TSMC is expanding its manufacturing capabilities in Arizona so that for the first time ever we will produce, at scale, the most advanced semiconductor chips on the planet here in the United States of America,” said US Secretary of Commerce Gina Raymond. “[We are] massively strengthening our national security posture.”
“Our U.S. operations allow us to better support our U.S. customers, which include many of the world’s leading technology companies,” said Mark Liu, president of the leading contract chip manufacturer.
The latest plans will bring semiconductor manufacturing in the United States closer to the state of the art, as artificial intelligence drives demand for ever-greater computing power.
TSMC had previously planned to operate its U.S. factories with older manufacturing technology than its more advanced mass production in Taiwan.
By 2026, most AI chips will run at 3nm, meaning the manufacturing capabilities of TSMC’s first plant in Arizona will be insufficient.
By the time TSMC’s second plant in Arizona opens in 2028, Nvidia and other AI chip suppliers are likely to have migrated to 2nm, an engineer familiar with the process said. Therefore, TSMC’s original plan to run the plant at 3nm “didn’t make sense,” a company executive said.
The US hopes the deal with TSMC means some of the most advanced chips used in artificial intelligence could be partly produced in the US by the end of the decade, reducing the dependence of chipmakers such as Nvidia and AMD on Asian production .
“The chips produced by TSMC. . . support all artificial intelligence. Tens of thousands of cutting-edge chips are needed to train a single frontier AI model [such as OpenAI’s GPT4]” Raimondo said. “And now, thanks to this announcement, these chips will be produced in the United States of America.”
But industry executives and analysts said that claim went too far.
“Having 2nm in the second factory doesn’t mean that Nvidia will no longer buy chips made in Taiwan,” said a person familiar with TSMC’s plans, “it just means that they will have the ability to issue a special requirement that a certain quantity of their chips comes from that [Arizona] fabulous.”
TSMC’s cutting-edge investments at home continue to far exceed those in the United States. It will begin mass production of 2nm next year and plans to build “multiple” more factories operating with that technology in three locations in Taiwan, Liu told investors in January.