After years of planning, The world’s largest semiconductor foundry, Taiwan Semiconductor Manufacturing Co. (TSMC) officially begins mass production at an advanced chip manufacturing facility in Phoenix in 2025. The fab represents the arrival of advanced US chip manufacturing and a test of whether the Chip and Science Act of 2022 can help stabilize the semiconductor industry’s supply chain for the United States and its allies.
In late October 2024, the company reported that revenue at the Arizona plant was 4 percent higher than that at the Taiwan plant, a promising early sign of the plant’s efficiency. The current factory is capable of running on a 4-nanometer node, the process used to make Nvidia’s most advanced GPUs. The second factory, due to be commissioned in 2028, plans to offer 2- or 3nm-node processes. Both the 4nm and the more advanced 3nm chips began mass production at other TSMC factories in 2022, while the 2nm node will begin mass production in Taiwan this year. In the future, the company plans to open a third factory in the United States, which will use more advanced technologies.
The chip giant is currently poised to receive $6.6 billion in CHIPS Act funding to build its first plant in Arizona. But government funding isn’t the only reason semiconductor manufacturing is returning to the United States. TSMC makes 90 percent of the world’s advanced chips and is relied on by US companies including Apple, Nvidia, Google, Amazon and Qualcomm. Chip shortages during the economic shock of the early years of COVID and Chinese President Xi Jinping’s increasingly aggressive rhetoric on Taiwan made TSMC’s customers and international politicians uncomfortable.
TSMC announced its intention to invest in Arizona in 2020. “The CHIPS Act didn’t make it happen — companies largely moved on their own,” says TechInsights semiconductor analyst Dan Hutcheson. Big customers like Apple are pushing TSMC to build factories elsewhere to minimize risk, he says.
Hutcheson says having TSMC factories outside of Taiwan is good for the company’s customers and good for Taiwan. The island’s “silicon shield” against China has done its job – TSMC’s dominance in advanced chip manufacturing gives the United States and other countries a reason to support Taiwan. But moving forward, Hutcheson says the shield could turn into a target. If the United States and its allies are increasingly dependent on chips made only in Taiwan, then China can do a lot of damage to the American economy by targeting Taiwan. Hutcheson says TSMC’s geographic diversification will make its home country less of a target. The company also opened a factory in Japan and is building one in Germany.
TSMC’s workforce issues
Reaction to the Arizona factory in Taiwan was mixed. An investigation published in
the rest of the world in April 2024, US workers sent to Taiwan for a year of training walked out, complaining of poor working conditions and inadequate training; in the same article, Taiwanese workers complained that the Americans were arrogant and lacked the work ethic for a semiconductor factory.
“TSMC functions like a military organization. Decisions are made from the top down, and you’re not supposed to ask questions,” says University of Chicago economics professor Chang-Tai Hsieh, who once worked at the company.
On the other hand, many American engineers have a Silicon Valley attitude of “move fast and break things,” says Jason Hsu, a former Taiwan lawmaker who is now a specialist on the Indo-Pacific technology industry at the Hudson Institute in Washington. , DC, a think tank. But this is not an easy connection with a process that can be disturbed by a single speck of dust.
Hutcheson says these kinds of culture clashes are to be expected — and TSMC seems to have mastered them. The problem may have been that the company set unrealistic goals and timelines. TSMC saw building a factory in the United States “as a simple technology problem,” Hutcheson says. “They see it as a one-size-fits-all but not one-size-fits-all skill set. It’s very culturally and legally dependent.” Each city in the United States may have different building codes and permitting processes, for example—and that differs from how things work in Taiwan, he says. As more factories open, the U.S. facing a shortage of engineers and technicians.
Fab Plans Intel and Samsung
TSMC is not the only company planning to open an advanced factory in the United States with the support of the CHIPS Act. Samsung is also poised to raise $6.4 billion in potential funds to open a factory in Taylor, Texas, but the company has pushed back production from the second half of 2024 to a possible 2026 opening. Hsieh says the culture clash is the least of Samsung’s problems. The company doesn’t have enough customers for the chips it makes in South Korea, and there won’t be demand for the chips it could make — probably at a higher price — in Texas, Hsieh says.
Intel was one of the biggest lobbyists behind the CHIPS Act and has been looking to revive its foundry business since former CEO Pat Gelsinger was named to the post in 2021. Intel’s technology is lagging behind, and like Samsung, the company is struggling. find enough customers. However, Intel plans to open new locations in the United States. The expected $8.5 billion in direct CHIPS Act funding will go toward building state-of-the-art factories in Arizona and Ohio; converting two plants in New Mexico to packaging facilities; and the purchase of next-generation extreme ultraviolet lithography equipment for the company’s Oregon facility.
At the time of publication, it remains unclear how the Trump administration might seek to change the implementation of the CHIPS Act. Until major changes are made, TSMC’s Arizona factory opening will be a test of both the CHIPS Act’s ability to stimulate domestic manufacturing and the company’s international expansion, Hutcheson says. “What’s happening in Phoenix is pretty amazing,” he says.
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