- TSMC chip factories in Arizona have faced construction delays.
- But the company said it was “on track” to start producing chips at its first factory in 2025.
- TSMC plans to charge more for chips made outside Taiwan to combat rising manufacturing costs.
Things could start to look up for the world’s top chipmaker.
Last year, Taiwan Semiconductor Manufacturing Company reported its first profit decline in four years. But on April 18, the company reported its strongest sales growth since 2022 and a higher-than-expected quarterly profit increase. Taiwan-based TSMC also forecasts that second-quarter sales could rise as much as 30% due to “insatiable” demand for chips used to power AI technologies such as ChatGPT.
But for the United States, in particular, perhaps the most important detail of the call was the updated construction schedule for TSMC’s chip factories in Arizona. TSMC said it had made “significant progress” in building its first factory in Arizona – located in the Phoenix area – and was “on track” to begin producing chips in the first half of 2025. The company said production of technical wafers began at the factory in April, an important step toward eventual chip production.
The chipmaker’s commitment to build three factories on its Phoenix campus is a key pillar of the Biden administration’s efforts to boost U.S. manufacturing of chips that power everything from cars to iPhones. Strengthening domestic manufacturing could also make the United States less dependent on Taiwan – which faces the potential risk of a Chinese invasion.
TSMC’s progress is also important to President Joe Biden, as Arizona is a key state for the upcoming presidential election. The company’s investment is expected to create about 6,000 “high-wage” factory jobs, in addition to more than 20,000 construction jobs and tens of thousands of indirect supplier jobs.
However, the construction faced a series of challenges. Last July, TSMC announced that the production of chips for the first factory would be delayed from 2024 to 2025. The lack of qualified construction workers in the United States was cited as a reason for the delay of the first factory. In addition, in January, the opening of its second factory was postponed from 2026 to 2027 or 2028.
Barring further setbacks, TSMC’s update could mean the first factory will start producing chips in 2025. In recent weeks, however, a report from Chinese media outlet money.udn fueled speculation among some experts, production could begin by the end of 2024 – TSMC stuck to the 2025 timeline in public comments.
The sooner chip production begins, the sooner Americans will have access to the “long-term,” non-construction jobs promised by TSMC, Dylan Patel, chief analyst at the semiconductor research and consulting firm, told Business Insider. SemiAnalysis drivers.
During the earnings call, TSMC said 2028 was the planned opening of the second factory. The third factory is expected to start production by 2030.
TSMC plans to charge more for chips made outside Taiwan
Earlier this month, TSMC received more good news: the Biden administration announced it would provide the company with up to $6.6 billion in direct financing and an additional $5 billion in loans proposed to support its investment in Arizona.
Chipmakers are vying for funding for the CHIPS and Science Act, legislation passed in 2022 that is expected to fund more than $200 billion in U.S. chip production.
This funding could be particularly important for TSMC, given that the cost of building the factory and manufacturing the chips can differ from country to country. the United States and Taiwan.
In 2022, TSMC founder Morris Chang said U.S. efforts to boost chip production would be “an unnecessary and expensive exercise,” adding that “chip manufacturing in the U.S. costs 50% more than ‘in Taiwan’.
During its first-quarter earnings conference call, TSMC said cost pressures would force it to charge more for chips made outside Taiwan, the Financial Times reported. The company also plans to build two factories in Japan and one in Germany.
“If a customer requests to be in a certain geographic area, they have to share the additional cost,” said CC Wei, CEO of TSMC, during the earnings conference call.
While boosting U.S. manufacturing of chips and other products could create jobs and help secure supply chains, it could also lead to higher prices for U.S. consumers.
If Apple, for example, follows through on its commitment to source its chips from TSMC factories in Arizona, it could make the latest iPhone more expensive.
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