Skip to content

TSMC gives insight into Arizona factory to compete for federal chips funding

Phoenix Business Journal

Taiwan Semiconductor Manufacturing Co. is vying for federal funds by highlighting its work globally and its current and future operations at its planned Phoenix factory.

In response to the U.S. Department of Commerce request for information on the implementation of the CHIPS incentives program, TSMC said that the CHIPS Program Office should prioritize grant applicants that have a “long successful track record in advanced logic fabrication, R&D and existing sizable headcount that offers decisive proof points that the incentives provided will lead to a successful investment result.”

“In maintaining global leadership for decades to come, U.S. technology companies will rely on the fastest and most dynamic chips manufactured at TSMC’s semiconductor complex in Phoenix, Arizona,” the company said in a Nov. 14 letter to the U.S. Department of Commerce.

Billions of dollars for the semiconductor industry will soon be doled out by the Commerce Department and Arizona is primed to be a huge recipient. The CHIPS and Science Act, which became law on Aug. 9, includes $52 billion to boost the domestic semiconductor industry, and several Arizona organizations are submitting applications to get a piece of the funding.

TSMC faces challenges in construction costs

TSMC said it has mostly relied on its own capital, supplemented by direct U.S. incentives, to build its chip complex in Arizona and doesn’t view “access to capital as a significant barrier to growth” in the U.S.

“The real barrier is comparative cost to build and operate, and therefore the company encourages the maximum amount of money be made available as part of direct government allocations to global companies building and manufacturing facilities aimed at leading edge fabrications,” it said in the letter.

TSMC urged the department to award grants based on priorities in the CHIPS Act and delivered “promptly to qualifying organizations most prepared and capable to manufacture and compete effectively.” The Phoenix fab started construction in April 2021 with commercial operations expected to start in December 2023, “an extended period of time,” the letter said.

The company also highlighted some of the differences in manufacturing in the U.S. versus other countries, adding that “the company can confirm that a range of construction costs and project uncertainty in Phoenix makes building the same advanced logic wafer fab in Taiwan considerably less capital intensive,” it said. “Since the onset of construction at the Fab 21 site the company has encountered issues that are likely similar to those being experienced by other foreign and domestic firms.”

TSMC said those factors include inflation in material and shipping costs, federal regulatory requirements that increase project scope and cost, local labor and productivity differential costs, project risk costs and fees, additional site preparation and new infrastructure expenses and state and local taxes on construction, facility and utility use.

TSMC said supplier network, ecosystem should also be supported

The semiconductor giant, which makes a large portion of the world’s chips, said the company has so far hired more than 1,000 workers for its Phoenix operations and said this will grow to 2,000 by 2023. It is also working with 40 suppliers that are “taking steps” to establish operations near the 1,000-acre campus.

“The physical adjacency of these companies near TSMC’s facility reduces costs and allows for real time coordination. Coming onshore for some of these Taiwanese companies has been financially challenging and the lack of a bilateral tax treaty has increased the cost of deploying capital in the U.S.,” TSMC said.

Suppliers TSMC is working with to “re-establish leading edge manufacturing in the U.S.” includes Sunlit Chemical, ASML, Applied Materials, Lam Research, Tokyo Electron America, LCY Group and Chang Chun Petrochemical, among others, the company said.

“They are crucial to TSMC’s success and ought to be favorably considered for funding,” TSMC said.

Since announcing its Phoenix factory, TSMC said it has highlighted the need for the U.S. to compete in different semiconductor industry segments including equipment manufacturers, fabless companies, IDMs, foundries and OSATS.

TSMC said it has not experienced significant production delays but added that ensuring adequate sourcing and second sourcing for materials is a “common challenge.”

“Importing or manufacturing chemicals covered by the U.S. Toxic Substances Control Act often require additional steps for production or use in the United States,” the letter said. “The increased localized manufacture of tools, wafers, photomasks, advances substrates, materials and other parts of the production chain will prevent potential bottlenecks and delays in producing semiconductors.”

ASML is a sole provider of extreme ultraviolet lithography machines that are “critical” to TSMC’s chips, it said, adding that TSMC will be the first company to deploy EUV tools in the U.S. at Fab 21. TSMC, which works with 3,000 suppliers globally, also said that it has 500-plus global customers.

In addition, TSMC highlighted its efforts to help develop a workforce in Arizona. It said it has partnered with Estrella Mountain Community College and supports university programs such as Purdue University’s semiconductor degree program, Arizona State University, Semiconductor Research Corporation and more.

Arizona works to boost semiconductor industry

The letter comes on the heels of Apple announcing its plans to source chips from TSMC’s Arizona factory, as well as TSMC’s confirmation that it is seriously considering building a second factory in Phoenix. It’s been previously reported that TSMC planned to build six factories in Arizona.

The state also announced that it was allocating $100 million in federal American Rescue Plant Act funds to boost the semiconductor industry in Arizona.

The U.S. is working to domesticate semiconductor manufacturing amid a global shortage of chips and to reduce reliance on other countries amid global supply chain challenges during the Covid-19 pandemic.

Right now, the greatest quantity and most complex chips come from Asia. The CHIPS Act was designed to regain some of America’s lost semiconductor supremacy.

Former Phoenix Business Journal reporter Andy Blye contributed to this report.


Register for the Council’s upcoming Phoenix and Tucson tech events and Optics Valley optics + photonics events.


Sign up for our