TSMC, maker of iPhone chips, to build $12bn chip factory in US

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), a leading supplier to Apple Inc, announced on Friday it would build a $12bn chip factory in Arizona, in what the company called a “strong partnership” with the US government.

The move by the world’s biggest contract manufacturer of computer chips coincides with an effort by the administration of President Donald Trump to bring more foreign manufacturing to the United States.

The plant will create as many as 1,600 jobs and produce the most sophisticated 5-nanometer chips, TSMC said in a statement. The Taiwan company also has an older chip facility in Washington state.

TSMC said construction on the facility would begin in 2021 and that it would be able to process up to 20,000 silicon wafers per month. Each wafer can contain thousands of individual chips.

“This project is of critical, strategic importance to a vibrant and competitive US semiconductor ecosystem that enables leading US companies to fabricate their cutting-edge semiconductor products within the United States…,” TSMC said, calling the investment a “strong partnership with the US administration”.

Shares of TSMC, the world’s most valuable semiconductor company with a market capitalisation of $255bn, rose more than 1.5 percent on Friday morning, outperforming a 0.8 percent gain in the main Taiwan stock market.

The Wall Street Journal newspaper first reported the latest details of TSMC’s plans.

The move comes after the Commerce Department drafted a rule that, if implemented, could severely restrict sales of chips by TSMC to blacklisted Chinese telecoms equipment maker Huawei, a key customer. One of the two sources, a Commerce Department official, said the decision to locate the plant in the US generates “goodwill” at the department.

TSMC makes the chips that power Apple’s iPhones and the iPhone maker works closely with the chip manufacturer to become the first to take advantage of new advances in chip-making processes.

US-China rivalry

Semiconductors play a key role in consumer electronics and defence equipment. The vast majority of the most advanced chips are made in Asia, which has caused concern among US officials as a strategic rivalry with China deepens over the origins of the coronavirus.

While rival Intel has large manufacturing operations in the US, it supplies only its own chips rather than making them for outside customers.

The Trump administration has been in talks with Intel and TSMC to build a plant in the US. One of the people said Intel would have been a difficult choice because its customers would see Intel as a supplier and a rival.

Last week, TSMC said it had been considering the US as a location for a new factory but there was “no concrete plan yet.”

One of the sources said the Commerce Department had spearheaded talks with TSMC over the potential plant for about two years.

Last week, Intel said it was in discussions with the Department of Defense about improving domestic sources for microelectronics and related technology.

The Department of Defense had been working with companies to bolster the supply chain for microprocessors, a person familiar with the matter said. The TSMC announcement is not expected to derail the Pentagon’s efforts, despite the Commerce Department working on the TSMC deal independently, the person said.

Apple and Intel declined to comment.