TSMC to double investments in U.S. chip factories

Taiwan Semiconductor Manufacturing Co is weighing plans to pump tens of billions of dollars more into cutting-edge chip factories in the U.S. state of Arizona than it had previously disclosed, but is cool on prospects for an advanced European plant, people familiar with the matter reports.

TSMC is the world’s most advanced chip-maker, and its investment plans are being closely watched amid a global chip shortage and new initiatives in the U.S. and Europe to subsidize semiconductor production.

TSMC announced last year that it would invest $10 billion to $12 billion to build a chip factory in Phoenix.

PageOne this month reported that previously disclosed factory could be the first of up to up to six planned plants at the site.

Now, company officials are debating whether the next plant should be a more advanced facility that can make chips with so-called 3-nanometer chipmaking technology compared to the slower, less-efficient 5-nanometer technology used for the first factory.

The more advanced 3-nanometer plant could cost $23 billion to $25 billion, one person familiar with the matter reported.

Details of TSMC’s plans for the additional factories at the Arizona site have not been previously reported.

Officials have also sketched out plans for TSMC to make next-generation 2-nanometer and smaller chips as the Phoenix campus is built out the next 10 to 15 years, the source said.

In building the plants, TSMC is likely to compete against Intel Corp and Samsung Electronics Co Ltd for subsides from the U.S. government.

President Joe Biden has called for $50 billion in funding to support domestic chip manufacturing, and the U.S. Senate could take action on that as early as this week.

Some government officials worry that subsidies for TSMC could help Taiwan, where the company would likely continue to conduct research and development, more than the U.S. But the U.S. subsidy plan does not exclude foreign firms.

Government and industry officials say a strong domestic chip-making sector is critical for the economy and national security.

Although U.S. chip firms such as Qualcomm Inc and Nvidia Corp dominate their markets globally, most of their chips are manufactured in Asia.

Intel has also committed to two more new fabrication plants, or fabs, in Arizona, while Samsung is planning a $17 billion factory adjacent to an existing facility in Austin, Texas.

A debate over how to boost chip-making is also playing out in the European Union. Intel has shown serious interest in those efforts, with chief executive Pat Gelsinger pitching a subsidy that could amount to $9 billion for a proposed “Eurofab” during a trip to Brussels last month.

EU industry commissioner Thierry Breton, who has championed the Eurofab idea, also spoke with TSMC’s Europe president, Maria Marced, last month.

European chip and auto companies, for their part, are mostly lined up against the idea. They would prefer subsidies for the older-generation chips that are heavily used by car manufacturers and are in short supply.

Many of TSMC’s most lucrative customers, such as Apple, are U.S.-based, while its European customer base is made up of mostly of automakers buying less-advanced chips.

In the first quarter, clients based in Europe and the Middle East only accounted for 6% of TSMC’s revenue, far outpaced by the by 67% of sales from North America and 17% from Asia Pacific.

Sources said TSMC has not ruled out building an older-generation chip plant in Europe to serve auto customers.

TSMC this year hired Benjamin Miller, a 25-year Intel veteran, as its head of human resources in Arizona.

The company says that it has hired 250 engineers there and that about 100 of them, along with their families, have been sent to Tainan, Taiwan, where they will complete a 12- to 18-month training program before returning to Arizona.

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