Apple's Chip Maker Relocated Engineers and Built a Factory in Arizona to Hedge against China
The TSMC founder Morris Chang giving opening remarks this Tuesday at Phoenix, Arizona Photo: Adriana Zehbrauskas/New York Times
On Tues. Dec. 6, Taiwan Semiconductor Manufacturing, or TSMC, one of the world's largest chip makers, announced the construction of two labs with the capacity to manufacture N4 and 3nm technology in Arizona, representing the largest foreign direct investment in Arizona.
In the official announcement, TSMC outlined a $40 billion investment to build a US-based semiconductor production facility in Phoenix, Arizona. According to the plan, the Taiwanese chip giant will import industry-leading technology and relocate engineers from Taiwan–both of which were previously limited to the company's factories in Taiwan.
The Taiwan-based company has been the biggest maker of leading-edge semiconductor chips and a long-term contractor of Apple's iPhone. Yet its location worries US investors, companies, and officials due to Taiwan's geopolitical conflict with China. Once the new facility in Phoenix is fully upgraded, the US factories will have the capacity to eventually produce chips for Apple's iPhone under a significantly lower geopolitical risk. Combined with the economic interest the new factory will present in the southwest US, the plan receives endorsement from across the US officials and industries, including President Joe Biden and Apple's CEO, Tim Cook.
The significant upgrade to the US-based facility will make the US one of the first countries outside of Taiwan to have the capability to manufacture the latest semiconductor chip with industry-leading technology. TSMC will build advanced semiconductor factories, also called "fabs," which can fabricate hundreds of fingernail-size chips on 12-inch silicon wafers. Some of the necessary equipment for this microchip production has already arrived at the Arizona site in massive crates.
This expensive and complicated equipment is part of TSMC's $40 billion investment, including the $12 billion promised when the initial facility's construction was announced in 2020. The new upgrade marked not only the largest foreign direct investment in Arizona but also one of the largest investments in the history of the United States. The plan is estimated to employ 4500 permanent workers while creating 21000 construction jobs.
Perhaps more appealing than the job creation that drew President Biden to Arizona this Tuesday is the national security and economic advantage this plan will provide for the US. After touring the massive facility, President Biden framed the TSMC investment as part of his plan to win America "the economics competition of the 21st century" and "lead the world once again in manufacturing."
Addressing the importance of chips has been one of the only Biden administration's common ground with the Trump administration. In July, the $52 billion package of subsidies in the CHIPS act proved semiconductor chips development again in the US can garner bi-partisan support. Similarly, Commerce Secretary Gina Raimando addressed the national security issue during Tuesday's event with President Biden. The inability to produce sophisticated microchips is "a national security issue, a national security vulnerability", according to Raimando.
Clearly, the move to produce semiconductor chips in the US will bring political capital and national security edge to the Biden administration. But for Taiwan, where TSMC is based, there is an unease that the east Asia island will lose its "chip shield." Besides the potential of TSMC stripping Taiwan of its unique asset–advanced chip technology–there is a growing concern that the decreased presence of the company's leading-edge production in Taiwan would expose Taipei to potential invasion. In the past, the administration and the general public believed that the TSMC's unique presence in Taiwan incentivised Western allies to defend Taiwan from China's invasion. Once the Arizona facility can mass-produce microchip products, the risk presented by Beijing's aggression will decrease, and so as the incentives to protect Taiwan.
As a matter of fact, Taiwan is not the only risk the Arizona facility can help decrease for the tech industry. In the past, Zhengzhou protests or similar domestic unrest in China created huge delays in iPhone production. Although the Arizona facility is responsible for more sophisticated microchips instead of simple assembly, moving the manufacturing focus away from East Asia will provide a more robust supply chain when any unrest happens. The implication is the diminished importance of China in the global supply chain, which explains the raging reaction from Chinese media by calling the Arizona fab a "dark turn" for the global semiconductor industry. Either way, we will likely see a new era of the global supply chain, where the US will play an even more vital role in innovation and design for microchip production after the TSMC Arizona fab.
President Biden arrived at the TSMC factory in Phoenix. Photo: Adriana Zehbrauskas/New York Times