On the heels of media reports that Taiwan Semiconductor Manufacturing Co. was considering expanding in Arizona, the company confirmed Tuesday that it will build a second fab in north Phoenix to produce 3-nanometer chips by 2026 and significantly increase its investment in the state.
To mark a significant milestone in Phoenix, TSMC held a tool-in ceremony on Tuesday for the arrival of its first batch of production equipment at the Arizona fab, where President Joe Biden, TSMC’s founder Morris Chang, Apple CEO Tim Cook, Micron Technology CEO Sanjay Mehrotra and numerous industry and elected officials were in attendance.
The company’s second fab is expected to increase the semiconductor giant’s investment from the initial $12 billion to about $40 billion, one of the largest foreign direct investments in Arizona and U.S. history, according to the White House. This is more than what sources previously said would total a $35 billion investment in Phoenix.
TSMC also revealed its plans to develop even more advanced chips than originally proposed at its first facility in north Phoenix, which will produce 4 nanometer chips instead of 5 nanometers by 2024. The 3 nanometer chips are currently the most advanced on the market.
TSMC’s cutting-edge 2-nanometer chips will be produced at a Taiwan semiconductor plant by 2025, according to reports this summer. Nanometers indicate the density of transistors on a chip, which means the smaller the nanometer, the more power-efficient the chip is.
When both fabs are operational, White House officials said the Phoenix facilities alone could meet the entire U.S. demand for advanced chips, while both Apple and AMD, both of which will be in attendance on Tuesday, are planning to source chips from TSMC’s Arizona facility.
TSMC first announced its plans to invest in Phoenix in 2020. Since then, sources with knowledge of the company’s plans have told the Business Journal that the chipmaker’s campus at full build-out could total six factories, while the company has also said it is working with 40 suppliers that are moving or expanding to the Phoenix area and in Pinal County south of the Valley.
So far, TSMC has hired more than 1,000 workers for its 1,100-acre Phoenix campus. In addition to more than 10,000 construction workers who have helped with the site, TSMC said its two Arizona fabs will create 10,000 high-tech jobs, including 4,500 direct TSMC jobs. TSMC’s two Arizona fabs will manufacture more than 600,000 wafers per year, with estimated end-product value of more than $40 billion, according to the company.
Biden to tout investments following CHIPS and Science Act
The U.S. and Arizona have in recent months made a concerted effort to boost the industry through the CHIPS and Science Act, which was signed into law in August 2022 and includes $52 billion in incentives to boost the country’s semiconductor industry.
Currently, most of the world’s chips are produced in Asia, but the U.S. is trying to regain leadership in the industry to reduce reliance on global supply chains and national security risks, amid a global chip shortage and ongoing tensions between China and Taiwan.
White House officials said that Biden on Tuesday will highlight TSMC’s investment and commitment to expanding, as well as several other major semiconductor announcements nationally, as a result of the CHIPS Act being signed into law.
Although eligibility requirements for the federal incentives will not be released until Q1 2023, White House officials said the incentives show the U.S.’s commitment to building up the industry and supporting its allies and neighbors such as Mexico, which is also expected to see growth in semiconductors and manufacturing operations.
In addition, Biden will point to Arizona’s manufacturing growth as an example of his administration’s economic plan to revitalize manufacturing and strengthen supply chains, with news of Intel’s $20 billion expansion in Chandler, KORE Power’s $1.2 billion investment in Buckeye and Corning’s $100 million investment in Gilbert, among others.
Also in attendance on Tuesday will be several Arizona government leaders including Gov. Doug Ducey, Governor-elect Katie Hobbs, Phoenix Mayor Kate Gallego, U.S. Sen. Mark Kelly and several U.S. representatives.
TSMC, as well as its suppliers, have identified challenges in increased costs and regulations for construction while trying to build in Phoenix compared to overseas. TSMC has listed this as reasons why incentives such as the CHIPS Act are critical for building its ecosystem of suppliers and related companies. The company also announced Tuesday that it’s in the planning stages for building an on-site industrial water reclamation plant, which will reduce liquid discharge.
Across the U.S., other semiconductor manufacturers are also gearing up plans to produce advanced chips at new complexes in states such as Idaho, Texas, Ohio and New York. Samsung Electronics Co. Ltd. could be investing a staggering $200 billion and at least 10,000 jobs and 11 fabs in Taylor, northeast of Austin in the coming decades, the Austin Business Journal reported this year.
The U.S.’s effort to boost semiconductor and manufacturing comes as other countries are also competing for giant chip makers and offering more incentives for new factories. Arizona has also announced that it was allocating $100 million in federal American Rescue Plant Act funds to boost the semiconductor industry in Arizona.
This report was updated at 2:43 p.m. following the event at TSMC. Check back for a new story on Biden’s tour of the construction site.
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