The U.S. Commerce Department on Monday proposed investing up to $6.6 billion to fund a third Taiwan Semiconductor Manufacturing Company Limited (TSMC) manufacturing plant in Arizona. Funding would come through the CHIPS and Science Act, with the goal of further fostering domestic semiconductor production.
The move represents a broader initiative to attract more manufacturing to the United States, but the fanfare around today’s announcement does not hint at the potential escalation of tensions with China.
The proposed plant is a greenfield facility, meaning it is custom built from the ground up. It would focus on 2nm (“or newer”) architectures, designed for a multitude of different applications, including computing, 5G/6G wireless communications and, of course, AI. TSMC Arizona – the subsidiary behind the construction project – said it would build the facility before the end of the decade.
The chipmaker says construction will create more than 20,000 jobs in the region, while also planning for approximately 6,000 manufacturing positions once the facility is operational.
Localized manufacturing has been a major priority for the Biden administration as the COVID-19 pandemic has exposed vulnerabilities in the global supply chain. These problems have been exacerbated by the ubiquity of silicon in our daily lives. These numbers are only increasing. According to a semiconductor trade association, global sales reached $47.6 billion in January 2024, an increase of more than 15% from the previous year.
“TSMC’s renewed commitment to the United States and investment in Arizona represents a broader story for semiconductor manufacturing made in America and with the strong support of America’s leading technology companies to build the products we rely on every day,” President Biden said. an outing linked to current events.
Much of the administration’s funding has focused on U.S. companies like Intel, which was targeted with its own $8.5 billion proposal in late March. TSMC, however, is an 800-pound gorilla, both in terms of market share and technological advancements. The company, however, found itself in the midst of looming geopolitical concerns. The United States and its allies would be at a huge disadvantage if China took control of Taiwan and its manufacturing capabilities.
TSMC has its own concerns about such a scenario. On the one hand, the company’s two biggest customers – Apple and Nvidia – are American. On the other hand, some in the United States have even gone so far as to suggest that the country bomb microchip makers, should such things happen.
“We need to make it very clear to the Chinese that if you invade Taiwan, we will blow up TSMC,” Massachusetts Congressman Seth Moulton said at an event in May.
The Democratic representative has since distanced himself from the clip, saying it was selectively edited by the Chinese Communist Party. However, he is not the only one to make such suggestions. Earlier that year, Trump’s former national security adviser Robert O’Brien said, “The United States and its allies will never let these factories fall into Chinese hands,” suggesting that the country destroy factories. O’Brien went so far as to compare these hypothetical actions to Britain’s actions during World War II.
Such sabre-rattling has drawn international criticism. Beyond the obvious ethical issues, such evasive action would have a massive impact on the global economy. Besides Apple and Nvidia, TSMC also serves Sony, MediaTek, AMD, Qualcomm and Broadcom, among others.
Despite all the money the US government continues to invest, Intel is only just catching up to TSMC’s multi-year technological lead. TSMC makes about 90% of the world’s most advanced chips. For now, the best defense the United States has against future disruptions – whether pandemics or geopolitical conflicts – is supply diversification. This applies to where and who makes the components.
While the architects of the CHIPS and Science Act would undoubtedly like to elevate American companies that manufacture domestically, our economy is global. TSMC is certainly aware of the value of supply chain distribution.
“The funding proposed by the CHIPS and Science Act would give TSMC the opportunity to make this unprecedented investment and bring our foundry service to the most advanced manufacturing technologies in the United States,” said the president of the giant of chips, Mark Liu, in a statement related to the news. “Our U.S. operations allow us to better support our U.S. customers, which include many of the world’s largest technology companies. Our U.S. operations will also expand our ability to be at the forefront of future advancements in semiconductor technology. »
For those monitoring U.S.-China relations, the upcoming presidential election could mark a key turning point. Former President Trump, for example, significantly escalated trade tensions. Huawei’s addition to the entity list marked a significant setback for the mobile phone company, as it lost access to key components of US companies like Google and Qualcomm.
Speaking last year, Avril Haines, now Biden’s former US director of national intelligence, said that if a US invasion disrupted TSMC’s Taiwan-based product, “it would have a huge global financial impact that I think would is between 600 billion and 1,000 billion dollars out of a total amount. on an annual basis for the first few years.
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