US May Lag in Advanced Chips Despite TSMC Investment

US may lag in advanced chips despite TSMC investment

As Taiwan Semiconductor Manufacturing Company (TSMC) continues its expansion into the United States with a new fabrication plant (fab) in Arizona, experts are suggesting that the most advanced chip manufacturing technology will likely remain in Taiwan for the foreseeable future. This strategic decision, driven by a combination of geopolitical considerations, cost factors, and established infrastructure, raises questions about the long-term implications for US chip self-sufficiency and the Biden administration’s push to onshore semiconductor production.

TSMC, the world’s largest contract chipmaker, is crucial to the global technology supply chain, producing chips for major companies like Apple, Nvidia, and Qualcomm. The company’s decision to build a $40 billion fab in Phoenix was hailed as a major victory for the US, aimed at reducing reliance on overseas chip production and bolstering national security. However, recent analyses indicate that the Arizona plant will not initially house TSMC’s most cutting-edge process technology.   

Currently, TSMC’s most advanced process technology is the 3-nanometer (nm) node, with plans to move to 2nm in the near future. While the Arizona fab is expected to produce 4nm chips, it is unlikely to receive the very latest technology at the same time as TSMC’s fabs in Taiwan. This lag raises concerns about the US’s ability to truly compete in the high-stakes world of advanced chip manufacturing.   

Several factors contribute to this strategic approach. First, TSMC’s primary focus remains on maintaining its technological lead and protecting its intellectual property. Concentrating the most advanced research and development, as well as initial production, in Taiwan allows for tighter control and minimizes the risk of technology leakage. This is particularly important given the ongoing geopolitical tensions with China, which views Taiwan as a breakaway province.

Second, the cost of building and operating advanced chip fabs is astronomical. TSMC has invested heavily in building a comprehensive ecosystem in Taiwan, including a skilled workforce, established supply chains, and close relationships with equipment suppliers. Replicating this ecosystem in the US would require significant additional investment and time. It is more cost-effective for TSMC to leverage its existing infrastructure in Taiwan for the most advanced technologies, while using the Arizona fab for slightly older, but still highly valuable, process nodes.   

Third, talent acquisition and retention present a significant challenge. Building and operating a leading-edge fab requires a highly specialized workforce. While TSMC is working to train local engineers and technicians in Arizona, it will take time to develop the same level of expertise that exists in Taiwan, where the company has decades of experience and a deep talent pool.

This strategic decision by TSMC has sparked debate about the effectiveness of the US government’s efforts to onshore chip production. While the Arizona fab represents a significant investment and will undoubtedly create jobs, it may not fully achieve the goal of achieving complete chip self-sufficiency, especially in the most advanced segments.

“While the TSMC fab in Arizona is a positive step, it’s important to understand that it’s not a complete solution,” said a semiconductor industry analyst, speaking on condition of anonymity. “The most advanced technology will likely remain in Taiwan for the foreseeable future, which means the US will still be reliant on overseas production for the cutting-edge chips that power our most advanced technologies.”

Despite these concerns, the TSMC Arizona fab still offers significant benefits. It will increase the overall supply of chips available to US companies, reducing reliance on a single geographic location. It will also create a domestic source of high-tech manufacturing jobs and contribute to the development of a US semiconductor ecosystem.