By Bob Davis, Kate O'Keeffe in Washington and Asa Fitch in San Francisco
Taiwan Semiconductor Manufacturing Co., the world's largest
contract manufacturer of silicon chips, said Friday it would spend
$12 billion to build a chip factory in Arizona, as U.S. concerns
grow about dependence on Asia for the critical technology.
TSMC said the project, disclosed earlier Thursday by The Wall
Street Journal, has the support of the federal government and the
state of Arizona. It comes as the Trump administration has sought
to jump-start development of new chip factories in the U.S. due to
rising fears about the U.S.'s heavy reliance on Taiwan, China and
South Korea to produce microelectronics and other key
technologies.
TSMC made the decision to go ahead with the project at a board
meeting on Tuesday in Taiwan, according to people familiar with the
matter, adding that both the State and Commerce Departments are
involved in the plans. Construction will begin next year with
production targeted for 2024, the company said in a statement.
TSMC's new plant would make chips branded as having 5-nanometer
transistors, the tiniest, fastest and most power-efficient ones
manufactured today. TSMC just started rolling out 5-nanometer chips
at a factory in Taiwan in recent months.
TSMC said the plant would make 20,000 wafers a month, making it
a relatively small facility for a company that made more than 12
million wafers last year alone. TSMC's Fab 18 in Taiwan, which
currently produces its 5-nanometer chips, was targeted for 100,000
wafers a month when it broke ground in 2018.
The company didn't say what financial incentives it may have
secured to build in the U.S., or where in Arizona the plant would
be built.
TSMC said the factory would employ more than 1,600 people, the
company said. The company cited the U.S.'s investment climate,
skilled workforce and investment policies as reasons to extend
manufacturing in the country beyond a smaller factory in Washington
state. Most of TSMC's factories are in Taiwan.
Politically, the announcement could be a win for President Trump
who has been campaigning to get companies to build in the U.S. He
has also been looking to make sure that Republicans retain their
majority in the U.S. Senate. Arizona Sen. Martha McSally is among
the Republicans facing a tough challenge in this November's
election.
"We shouldn't have supply chains. We should have them all in the
U.S.," the president said on Fox Business on Thursday, when
discussing production during the pandemic.
TSMC has had to spend big to maintain its lead in chip-making,
which requires some of the world's most complicated manufacturing
tools. In January the company outlined capital expenditures of
between $15 billion and $16 billion for this year.
The chip plant investment could also help TSMC in lobbying
efforts to get the Trump administration to drop its plans to
require an export license for many chips shipped to Chinese telecom
giant Huawei Technologies Co. that are produced by U.S.-designed
chip-making tools. The proposed new rule would give the Commerce
Department the ability to block the sale of semiconductors
manufactured by TSMC for Huawei, which the U.S. deems a major
national security threat. Huawei denies the allegations.
TSMC has been arguing that the rule, which national security
officials say is essential, would significantly reduce its revenue
and make it harder financially for it to build a manufacturing
facility in the U.S. Although senior cabinet officials decided in
late March to move ahead with the regulation, it has been stalled
with Commerce officials providing no clear deadline for its
publication.
The warming relations between TSMC and the administration could
stoke concerns from TSMC's U.S. competitors that they could face
even tougher U.S. restrictions than a foreign firm. They are
wrestling now with new export rules that make it harder for U.S.
companies to ship microchips and other advanced products to Chinese
customers without seeking an export license from the Commerce
Department provided they weren't destined for military use. Those
rules don't apply to foreign firms like TSMC.
The Trump administration has long sought to attract foreign
investment as a pillar of its America-first policy. Some of those
projects, however, haven't worked out well. Hon Hai Precision
Industry Co., the Taiwanese contract-manufacturing giant better
known as Foxconn, announced a $10 billion plant to make LCD panels
in Mount Pleasant, Wis. in 2017, but the operation has fallen far
short of initial ambitions.
TSMC's plant would likely not be at the leading edge of
chip-making technology by the time it begins production, if it
manufactures 5-nanometer chips as planned. TSMC has already started
making 5-nanometer chips, and has plans to move to 3-nanometer
transistors and smaller in the next few years.
TSMC's project would also not likely address a desire by the
Pentagon to have a U.S. firm make more chips for defense
purposes.
Last month, Intel Corp. chief executive Bob Swan sent a letter
to Defense Department officials expressing his company's readiness
to build a commercial foundry in partnership with the Pentagon, The
Wall Street Journal reported Sunday. A foundry is an industry term
typically referring to a chip factory that can make products on
contract for other companies.
A Defense Department official sent Intel's letter to Senate
Armed Services Committee staffers the next day, according to an
email viewed by the Journal, calling the proposal an "interesting
and intriguing option."
Intel has several manufacturing operations in Chandler, Ariz.,
from which a TSMC factory might threaten to poach. U.S. chip-makers
may also be wary of any incentives given to a foreign company that
they can't also access.
Intel declined to comment.
TSMC had been talking to U.S. officials as well as to Apple
Inc., one of its largest customers, about building a chip factory
in the U.S. for some time, but the conversations gained momentum
recently as concerns mounted about the fragility of the Asian
supply chain, according to people familiar with the matter.
The U.S. already has dozens of semiconductor factories, but only
Intel's are capable of making today's most advanced chips, those
branded as having transistors 10 nanometers or smaller. Intel,
however, mostly makes silicon for its own products.
Among foundries that make chips on contract for other companies,
only TSMC and Samsung Electronics Co. in South Korea make chips at
10 nanometers or lower. In the U.S., GlobalFoundries is a major
contract manufacturer that works closely with the Pentagon, but it
decided to halt development of the most advanced chips in 2018.
Laurie Kelly, a GlobalFoundries spokeswoman, said the company
stood ready to join with the industry and U.S. government "to
ensure America has the manufacturing capability it needs to supply
semiconductors to its most secure and sensitive technologies."
Added Saam Azar, a senior vice president of GlobalFoundries,
"You'd think to solve the public policy concern [of maintaining
U.S. leadership] you'd want to make sure U.S. domestic players are
getting the first bite, if not the only bite of the apple."
Many U.S. chip companies, including Qualcomm Inc., Nvidia Corp.,
Broadcom Inc., Xilinx Inc. and Advanced Micro Devices Inc., rely on
TSMC to manufacture many of their most advanced products. Intel
also makes chips with TSMC, according to TSMC's 2019 annual
report.
U.S. chip makers have backed off on building cutting-edge chip
factories domestically in recent years largely because of their
cost, and a rapid development cycle that means the benefits of
being ahead don't last long.
Meanwhile, other governments, including China, Taiwan, Singapore
and Israel, have poured generous financial support into developing
their own domestic manufacturing, paying for factory buildings and
subsidizing expensive equipment.
Write to Bob Davis at bob.davis@wsj.com, Kate O'Keeffe at
kathryn.okeeffe@wsj.com and Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
May 14, 2020 21:49 ET (01:49 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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