The biggest benefit will be closer proximity to customers, Liu said at a press event in Hsinchu, Taiwan last week. TSMC, which has most of its operations in Taiwan, will also have better access to talented people from around the world, he added.
“Taiwan is a small place,” Liu told reporters. “I hope to use some of the world’s most elite talent.”
Liu notes the many strengths of a production site in Arizona.
The state has plentiful supplies of water from the Colorado River. Electricity is very cheap, and it comes from renewable sources, Liu noted. Land is also plentiful. Arizona is a place where young people from both coasts of the U.S. want to go. The cost of living is more attractive, he said.
Still, Liu has reservations. In the United States, investment in chip production is too expensive, according to Liu. Whether it’s China, Taiwan or other nations, the costs of production must be the same, he said. Parts of the chip industry that the U.S. government wants to revive need investment incentives, Liu said.
“This is the direction where the federal and state governments need to make more effort,” he said.
Liu confirmed last week to EE Times that he has decided on a site in Arizona, but he still declined to name the location while he waits to sign a contract with the state government.
The world’s largest foundry, which leads the global semiconductor industry in production technology, has a strong suit of cards in its negotiations with the U.S. government, which seeks to turn its domestic semiconductor industry around after decades of decline.
Presidential support
Trump administration officials appear confident an agreement is imminent.
“TSMC’s plan to build a $12 billion semiconductor facility in Arizona is yet another indication that President Trump’s policy agenda has led to a renaissance in American manufacturing and made the United States the most attractive place in the world to invest,” Commerce Department Secretary Wilbur Ross said in a May 14 statement. “This plan is the result of years of close collaboration among TSMC, the governor of Arizona and his staff, and the administration.”
The plan makes sense to Credit Suisse Vice President Randy Abrams, who has tracked TSMC for years.
“TSMC’s plant would start production in 2024 and ramp to 20,000 wafers per month,” Abrams said. “If they can ramp it up to that level of capacity by 2025, it should be profitable as TSMC’s 5nm process, [it] would be very mature and up the yield curve.” The new plant could produce FPGAs, networking silicon, AI edge chipsets and some mobile/IoT products, he said.
Arizona is the fourth-largest base in the U.S. for semiconductor jobs including Intel’s facility in Chandler, Abrams said. The customer base in the U.S. accounts for 60 percent of TSMC’s sales, he adds. A new fab in the U.S. would provide TSMC the ability to make some U.S. military-grade semiconductors, and spread the risk in the case of a natural disaster like an earthquake in Taiwan, Abrams said. A new U.S. plant would also put TSMC on a more even footing with its main foundry competitor, Samsung, as well as GlobalFoundries and Intel, all of which have advanced logic capacity in the U.S., he continued.
Intel may be an important part of TSMC’s plan.
“We all know there is the potential for TSMC to build a more strategic relationship with Intel long term,” said Brett Simpson, a senior analyst with Arete Research. “It’s interesting that Intel has a 7nm fab planned to ramp up in coming years in same area of Arizona. These companies are going to benefit from TSMC’s operating local facilities – they can run faster hot lots, speeding up tape-outs, chip sampling and more.”
Broad Support
As the plan to revive the U.S. industry wins broad support among the two major political parties in America, TSMC is in a good position to win some of the subsidies it’s looking for.
On June 10, U.S. Sen. Mark Warner, D-Va., and John Cornyn, R-Texas, introduced the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act.
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The proposed legislation would provide billions of dollars as a stimulus to invest in U.S. chip production. That package would include “a trust fund in the amount of $750 million over ten years to be allocated upon reaching an agreement with foreign government partners to participate in a consortium in order to promote consistency in policies related to microelectronics.”
China is conspicuously absent from the list.
“The CHIPS Act will create thousands of high-paying U.S. jobs and ensure the next generation of semiconductors are produced in the US, not China,” said Rep. Michael McCaul, R-Texas, a sponsor of companion legislation in the U.S. House of Representatives.
Taiwan’s TSMC should be able to win some of those subsidies.
“The CHIPs bill looks to also have some potential for overseas companies willing to invest in U.S. manufacturing to qualify for some of the support,” said Abrams of Credit Suisse.
Challenges
The main challenge TSMC faces in the U.S. is the high cost of running a fab.
Technicians are paid two to three times more in Arizona than in Taiwan, according to Arete’s Simpson.
TSMC will not have an ecosystem in the U.S., including assembly and test companies and ancillary services, like the company does in Taiwan, he noted. That makes the need for subsidies even stronger.
“We think TSMC should have enough subsidy via state aid and federal support to deliver on their more than 20 percent return on equity target level,” Simpson said. ”This is the returns profile that TSMC commits to its shareholders.”
Typically, state governments provide aid to major U.S. fab investments, according to Simpson. While GlobalFoundries’ fab in Malta, New York likely received more than $1 billion in state aid, it’s quite rare to see the federal government providing support, Simpson said.
“With the U.S. putting large state and federal subsidies on the table, we think TSMC can achieve this [Arizona project],” Simpson said. The CHIPS legislation’s proposed strong financial support “is linked to TSMC’s move to commit production to the region,” he added.
Other analysts remain skeptical.
“TSMC’s announced fab plan in Arizona is very vague and simply not practical,” said Mehdi Hosseini, a senior research analyst with Susquehanna International Group. “A state-of-the-art leading-edge fab would need to be at a minimum of 45,000 wafers per month, while the supply chain around it has to be architected and built well in advance.”
Still, TSMC may be Washington’s only choice if it wants to revive advanced production in the domestic semiconductor industry.
“GlobalFoundries and Intel simply have missed the window of opportunity,” according to Hosseini. “Intel, with its new management team, is more in favor of strengthening their capital return instead of investing in R&D and thus the future.”
GlobalFoundries exited the leading edge a few years ago because their backer, the Abu Dhabi Investment Authority, did not want to invest and lacked the vision to remain patient, Hosseini said.
New Initiative
TSMC Chairman Liu recalls the time around 1983 when U.S. President Ronald Reagan announced the Strategic Defense Initiative, popularly known as Star Wars. Liu was working as a process integration manager at Intel in Santa Clara, California at the time.
“Federal policy is important,” Liu said last week in Hsinchu. “Reagan’s Star Wars project had an important influence on the rise of Silicon Valley in the U.S. Later, when globalization became a new policy, much of the tech industry migrated abroad. A number of advanced technologies were not established in the U.S.”
Liu’s words show his support for a renewal of the U.S. semiconductor industry.
Now, TSMC will join the Trump Administration at the bargaining table with a strengthened negotiating position. Nicholas Montella, a former official of the US Chamber of Commerce, joined TSMC last month to lead its government relations efforts.
The Commerce Department is both ally and adversary to TSMC. In addition to the welcoming message TSMC received from Commerce Secretary Ross, he’s also created a regulation that may halt TSMC’s sales to China’s Huawei, which accounts for 14 percent of TSMC’s sales.
One thing is certain. Both sides have leverage they’ll bring to bear in reaching a deal.
The post TSMC Reiterates Support for Arizona Fab appeared first on EE Times Asia.
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