TSMC to build new 5nm chip factory in Arizona with US government backing

Ticks plenty of diplomatic and supply chain security boxes with build in State tipped to be less MAGA-happy in 2020

Taiwan Semiconductor Manufacturing Company, the world's biggest chip maker, will build a $12bn chip factory in Arizona in what the company is calling a "strong partnership" with the US government.

The new plant, announced today, will employ 1,600 people and make 5nm chips, the smallest, fastest, and most-power efficient chips available. TSMC said the new factory will be able to produce 20,000 chip wafers a month, each of which can contain thousands of individual chips, though bear in mind TSMC produces hundreds of thousands of wafers a month globally.

The company said construction will begin next year, and estimated that production will begin by 2024.

"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 and benefit from the proximity of a world-class semiconductor foundry and ecosystem," the company said in a statement.

The new plan comes as the Trump administration pushes for more domestic chip production amid fears that the US is overly reliant on Asia for microelectronics. US officials are concerned that the country's supply lines are fragile due to trade and diplomatic disputes with China.

Earlier this week, it was reported that Washington was in talks with TSMC, Intel, and Samsung to develop new chip factories on US soil. TSMC is being targeted in particular because the it controls half the world market for made-to-order chips. By securing the new factory, Washington hopes to safeguard supplies for defence industry buyers, among others.

The US has dozens of chip factories, but only Intel's are capable of making chips of 10nm or smaller and Chipzilla seldom shares its foundries. Other local outfits have backed off building large, cutting-edge fabs because they require huge initial investment and, because the rapid development cycle, risk being superseded by newer technology.

On TSMC's side, agreeing to build the factory may help its efforts to quash a draft regulation by the Trump administration that would require a special export licence to ship US-designed chips to Chinese telecoms companies. The proposed rules would give the US Commerce Department the ability to block TSMC from selling its chips to Huawei, one of its biggest customers. TSMC has said that, if implemented, the rule would significantly reduce its revenues.

Previous deals to bring Asian companies onto US soil have not gone terribly well. A similar agreement with Foxconn, one of Apple's biggest suppliers, to build a $10bn LCD factory in Mount Pleasant, Wisconsin, has been hampered by delays. Foxconn insists that it will begin production this year.

The new TSMC fab will be the second chip factory the company has in the US. It currently operates a fab in Camas, Washington, as well as design centres in Austin, Texas, and San Jose, California. ®