US Senators Seek Suspension of TSMC Deal

U.S. Senate Minority Leader Chuck Schumer and two other Democratic Party senators have called for a suspension of a planned project by Taiwan Semiconductor Manufacturing Co. (TSMC) to build a chip plant in the state of Arizona.

The latest move by the senators is a further evidence thatpolitics continues to haunt TSMC, as EE Times surmised.

In a May 19 letter addressed to U.S Commerce Secretary Wilbur Ross and Defense Secretary Mark Esper, the senators requested the two Trump administration cabinet members to “cease any such negotiations or discussions” until the relevant authorization and appropriations committees have been briefed on plans, including any commitments the two departments have made to funding, tax breaks, licenses, or other incentives.

The announcement by TSMC last week was very likely motivated by a number of political factors, according to people who spoke to EE Times.

The choice of Arizona for the TSMC site was probably favored by the administration of U.S. President Donald Trump, who wants to support a state run by a governor in his own Republican Party, according to Dick Thurston, former chief legal counsel at TSMC, in an interview withEE Times. “Arizona is one of the few remaining ‘golden boys’ in the Republican network,” Thurston said. The Arizona decision was “not necessarily in the best interests of TSMC.”

As President Trump campaigns for re-election, he keeps reiterating his pledge to bring back jobs that had earlier been shipped overseas. The semiconductor industry long ago shifted from the U.S., where it started, to Asian nations like South Korea, Japan and Taiwan. Attracting TSMC to the U.S. appears to fulfill that pledge. It is also perceived as a way to slow China’s advance in 5G equipment production, another of Trump’s policies.

In their letter, the senators expressed concern that the Department of Commerce and Department of Defense have been in negotiations with TSMC to build the facility, a project that may include the use of federal subsidies. The senators also questioned if the US government agencies have a broader strategy for building a diverse U.S. semiconductor manufacturing supply chain.

On May 15, TSMC announced it will build a 5nm fab in Arizona at a cost of about $12 billion with support from that state and the U.S. federal government. Hours after the TSMC news broke, the U.S. Department of Commerce announced new restrictions on HiSilicon that also impact TSMC.

“We have serious questions as to how this project takes into consideration national security requirements and how it aligns with a broader strategy for building a diverse U.S. semiconductor manufacturing supply chain,” the letter said.

Production in China and America
Outside Taiwan, TSMC has a plant in the U.S. state of Washington that makes eight-inch silicon wafers. The company has more recently built a 12-inch facility in Nanjing, China and an 8-inch plant in Shanghai. In compliance with Taiwan regulations, TSMC keeps production technology at the Chinese fabs at least one generation behind its state-of-the-art manufacturing technology, which is currently at the 5nm node in Taiwan.

One possibility for TSMC in the future might be for TSMC to make chips for Chinese consumption in the Nanjing and Shanghai fabs while doing more sensitive production for U.S. consumption in its American fabs, according to a former U.S. State Department official who spoke to EE Times, on the condition of anonymity.

Most of TSMC’S production is in Taiwan, which China considers a renegade province. Since 1949, China has continuously used military and political pressure to unify with Taiwan, which has been autonomously ruled under its own government for more than seven decades.

Taiwan’s precarious geopolitical situation is a concern for nations and companies in the semiconductor supply chain. TSMC, with the world’s most advanced chip manufacturing technology, makes products for companies ranging from Apple to Xilinx. The field-programmable gate-array (FPGA) chips designed by Xilinx are used in U.S. military equipment.

While the U.S. Defense Department has reportedly been in separate discussions with Intel on broadening access to domestic semiconductor production, a comprehensive plan should also include working with other U.S. companies like Micron, GlobalFoundries, and Cree, among others, the letter from the senators said.

The Department of Defense and Department of Commerce efforts to increase domestic semiconductor capabilities should be focused on a coordinated plan to partner with the broader chip industry, including companies that already have built a significant presence in the U.S. and been through a rigorous security screening process, the letter said.

American taxpayers should invest in companies that meet U.S. security needs, particularly regarding sensitive technologies that competitors such as China are actively trying to steal, according to the senators. An onshore chip facility without such protections defeats the purpose of building a secure domestic production capability, they added.

Before further actions are taken, clarification is needed on how such security standards are being considered by the Trump administration in their negotiations with TSMC, the senators said.

Last week, the Department of Commerce announced “plans to protect U.S. national security by restricting Huawei’s ability to use U.S. technology and software to design and manufacture its semiconductors abroad.” China-based Huawei has previously been targeted by the Trump administration for sanctions that restrict sales of U.S. technology to the company on allegations that Huawei has illegally sold telecommunications equipment to Iran.

Huawei chip-design subsidiary HiSilicon is TSMC’s second-largest customer after Apple and accounts for about 14 percent of TSMC’s sales. The new Department of Commerce restrictions are expected to impact TSMC’s sales to HiSilicon.

The security of the microelectronics supply chain is critical to U.S. national defense. Assuring that chips purchased by the U.S. government are not security risks is a tremendous challenge. A disruption in the microelectronics market or a loss of confidence in the security of equipment for the U.S. military, intelligence or other governmental agencies would prove devastating, the letter said.

The senators said that a one-off investment like the proposed TSMC facility is inadequate to rebuilding U.S. manufacturing capacity in microelectronics, which is essential to U.S. national and economic security. Unfortunately, there is no evidence that the Trump administration has a comprehensive, integrated plan for achieving this, they added.

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