In January, Taiwan Semiconductor Manufacturing Co. outlined capital expenditures of between $15 billion and $16 billion for this year.
Photo: ritchie b tongo/ShutterstockTaiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of silicon chips, is set to announce plans to build an advanced chip factory in Arizona as U.S. concerns grow about dependence on Asia for the critical technology.
The plans for the plant, likely to cost billions of dollars, come 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 is expected to announce the plans as soon as Friday after making the decision at a board meeting on Tuesday in Taiwan, according to people familiar with the matter. The factory could be producing chips by the end of 2023 at the earliest, they said, adding that both the State and Commerce Departments are involved in the plans.
TSMC’s new plant would make chips branded as having 5-nanometer transistors, the tiniest, fastest and most power-efficient ones manufactured today, according to a person familiar with the plans. TSMC just started rolling out 5-nanometer chips at a factory in Taiwan in recent months.
It is unclear how much TSMC has budgeted or if it would get financial incentives from the U.S. to build. A factory capable of making the most advanced chips would almost certainly cost more than $10 billion, according to industry executives. It is also not clear how many jobs the TSMC factory would bring, although large modern chip-making operations usually employ thousands of people.
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 Swansent 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 partner 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
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