TSMC to build chip factory in Arizona as U.S.-China tech rivalry intensifies

Taiwan's largest contract chip maker Taiwan Semiconductor Manufacturing Co (TSMC) said it plans to build a $ 12 billion (about 90,660 crore) factory in Arizona, an apparent victory for the efforts of the company. Trump administration to tackle China's global technology supply chains.

The plan, which will be one of the largest incoming US investments recorded and will create more than 1,600 jobs, comes as US President Donald Trump intensifies criticism of Chinese business practices and Beijing's management of the novel coronavirus before the US presidential elections of November 3.

Trump has long been committed to reducing manufacturing from abroad and now a severe economic recession caused by the new coronavirus is pushing the government to end dependence on production and the chain. supply from the United States to China.

US Secretary of Commerce Wilbur Ross presented the deal as "another indication that President Trump's political agenda has led to a renaissance in American manufacturing."

TSMC is a major supplier to American tech giants like Apple and Qualcomm, as well as Chinese companies like Huawei, which Washington has blacklisted commercially.

"This project is of critical strategic importance for a dynamic and competitive American semiconductor ecosystem that enables large American companies to manufacture their advanced semiconductor products in the United States", TSMC told me.

Although huge in terms of foreign investment in the United States, the plan is modest by TSMC standards. For 2020, TSMC's investment plan is $ 15-16 billion (about Rs. 1.13 lakh crores – about Rs. 1.20 lakh crores).

The Taiwanese chip maker said the plan was to build the factory over nine years.

An official with the US Department of Commerce said that TSMC's decision to locate the factory in the United States had generated "goodwill" within the department, the drafter of a law which, if it were implementation, would severely restrict sales of TSMC chips to Huawei.

Credit Suisse analysts said the proposed restrictions could threaten 14% of TSMC sales from Huawei, exacerbate tensions between the United States and China, and delay the deployment of the next generation 5G mobile network.

The shares of TSMC, the most valuable semiconductor company in the world with a market capitalization of 255 billion dollars (about Rs. 19.26 lakh crores), exceeding Intel, rose by more than 1.5% on Friday morning , surpassing a 0.8% gain on the main Taiwan stock market.

"Although it is difficult to be certain, we believe that TSMC announcing a US Fab could eliminate the threat of further restrictions from Huawei in the very near future at least," analysts at JP Morgan said in a note.

Advanced chips
The factory, TSMC's largest foreign investment, will produce the most sophisticated 5-nanometer chips, which can be used in high-end defense and communication devices.

TSMC manufactures most of its chips in Taiwan and has older chip facilities in China and Washington state.

Its chips power Apple iPhones and the iPhone maker is working closely with TSMC to become the first to take advantage of new advancements in its chip manufacturing processes.

U.S. Secretary of State Mike Pompeo said the new TSMC plant's chips will power everything from artificial intelligence to 5G base stations and F-35 fighter jets.

Semiconductors play a key role in consumer electronics and defense equipment. The vast majority of the most advanced chips are made in Asia, which has aroused concern among US officials as a strategic rivalry with China deepens over the origins of the deadly coronavirus.

Although Intel has significant manufacturing operations in the United States, it only supplies its own chips rather than manufacturing them for external customers.

The Trump administration has been in talks with Intel and TSMC to build a plant in the United States, and Intel said last week that it was in talks with the Department of Defense to improve national sources of microelectronics and related technologies.

TSMC's announcement should not frustrate the Pentagon's efforts to strengthen the microprocessor supply chain, despite the Commerce Department's independent work on the TSMC deal, said a person close to the folder.

Apple and Intel declined to comment.

TSMC has stated that construction of the Arizona facilities will begin in 2021 and that production is expected to begin in 2024 and that it could process up to 20,000 wafers of silicon per month. Each slice can contain thousands of individual chips. The investment will be made from 2021 to 2029.

The Wall Street Journal first reported the latest details from TSMC's plans.

© Thomson Reuters 2020