TSMC planning to double its investment in the US chip factory

TSMC is considering additional investment in the cutting-edge chip factory in Arizona, USA, which is nearly double the amount previously disclosed. However, TSMC’s negotiations to build advanced factories in Europe failed to make the expected progress.

TSMC is the world’s most advanced chip manufacturer. With new measures such as global chip shortages and the introduction of subsidies for semiconductor production in the United States and Europe, TSMC’s investment plan is closely watched. TSMC announced last year that it would invest between US$10 billion and US$12 billion to build a chip factory in Phoenix.

It was previously reported that TSMC plans to build up to six factories, and the Phoenix factory is only the first. The company’s executives are now discussing whether the next factory should use a more advanced process to make chips using so-called 3-nanometer technology compared to the slower and less efficient 5-nanometer technology used in the first factory.

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People familiar with the matter said that more advanced 3-nanometer factories may cost between 23 billion and 25 billion U.S. dollars. The details of TSMC’s plant in Arizona have not been reported before, but the company’s executives are formulating research and development plans for 2nm and more advanced processes because the Phoenix plant will take 10 to 15 years to be fully completed.

In terms of building factories, TSMC may compete with Intel and Samsung Electronics for US government subsidies. The President of the United States has called for $50 billion in funding to support the domestic chip manufacturing industry, and the U.S. Senate may take action as early as this week.

Many US government officials worry that compared to domestic subsidies, TSMC may be more beneficial to Taiwan, and the company may continue to conduct research and development in Taiwan. But the US subsidy program does not exclude foreign companies.

US government officials and industry executives said that a strong domestic chip manufacturing industry is vital to the economy and national security. Although American chip companies such as Qualcomm and Nvidia dominate the global market, most of their chips are manufactured in Asia.

Intel has also promised to build two new manufacturing plants in Arizona, while Samsung is planning to spend $17 billion to build a new plant next to its existing plant in Austin, Texas.

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At the same time, the debate on how to promote chip manufacturing is also staged in the European Union. Intel has shown great interest in these efforts. During a visit to Brussels last month, Intel CEO Pat Gelsinger made a request for subsidies that could be as high as 9 billion U.S. dollars for the construction of the ” Eurofab” factory.

Thierry Breton, the European Commissioner in charge of industry and services, has always supported Eurofab’s idea. He also had a conversation with TSMC Europe President Maria Marce last month. Although Breton publicly called the talks with TSMC “quite pleasant”, people familiar with the matter said that TSMC’s negotiations in Europe were “not going smoothly.”

A TSMC spokesperson said that the company has not ruled out any possibility, but currently has no plans to build a plant in Europe. As far as European chip and car companies are concerned, most of them also oppose this idea. They are more willing to provide subsidies for mature chip manufacturing processes, because these chips are used in large quantities by car manufacturers and are in short supply.

Many of TSMC’s most profitable customers (such as Apple) are in the United States, while its European customer base is mainly composed of automakers that buy less advanced chips. In the first quarter of this year, customers headquartered in Europe and the Middle East accounted for only 6% of TSMC’s revenue, which is far lower than the 67% and 17% in North America and the Asia-Pacific region. However, people familiar with the matter said that TSMC has not ruled out the possibility of building mature process chip factories in Europe to serve automotive customers.

TSMC this year hired Benjamin Miller, who has worked at Intel for 25 years, as the director of human resources in Arizona. The company said it has hired 250 engineers there, of which about 100 engineers and their families have been sent to Tainan, where they will complete a 12 to 18-month training program before returning to Arizona.

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TSMC declined to comment on the specifics of its Arizona plan, but its chief executive Wei Jiazhe said last month that after the completion of the initial phase of construction, it is “possible to expand further.” He said that the company will measure on-site efficiency and customer needs before deciding what to do next.

TSMC chairman and founder Zhang Zhongmou warned in a public speech last month that the company’s operating costs are rising and that the US expansion plan lacks talent support. He said: “In the United States, the level of professionalism of professionals is not comparable to that of Taiwan, at least for engineers. Short-term subsidies cannot compensate for long-term operating disadvantages.”

TSMC’s first plant in Arizona is relatively small and is expected to produce 20,000 wafers per month (that is, 12-inch silicon wafers, each of which can hold thousands of chips). In contrast, TSMC’s foundry in Taiwan can produce 100,000 wafers per month. However, people familiar with the matter said that TSMC’s executives have a long-term vision, starting with mature technology, gradually increasing production while introducing the most advanced technology.

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