Arizona Is Getting a Big, New Chip Fab. Biden and Apple CEO Are Psyched

Story by Stephen Shankland • CNET

Taiwan Semiconductor Manufacturing Co. will announce on Tuesday that it's building a second new factory in Phoenix to create cutting-edge processors.

TSMC is building a fab in Phoenix, one of a pair the Taiwanese semiconductor giant has committed to operating in the United States. TSMC

That's big news for companies like Apple, AMD and Nvidia, whose chief executives will join President Joe Biden to laud the development.

TSMC is already building a chip fabrication plant, or fab, in the Arizona city -- a $12 billion investment to make processors with the newer 5-nanometer manufacturing process it uses to make iPhone processors and other chips today. At a ceremony to mark the arrival of the first chipmaking equipment at the fab, it'll announce it'll also make improved 4nm chips there and build a second fab to make significantly more advanced 3nm chips. The total investment: $40 billion.

Customers of TSMC currently rely on fabs in Taiwan, but modern fabs in the US could help ensure a US supply of processors too. More US chip manufacturing also can encourage a broader manufacturing ecosystem, including some business partners that supply chipmakers with equipment and materials and others that test, package, assemble chips after they're made.

It's unlikely the US will match the breadth of Asia's electronics manufacturing anytime soon, but if politicians and businesses get their way, the semiconductor industry might avoid the fate of industries like steelmaking and textiles that largely vanished from the US.

Processors are critical to just about every modern product and industry, not just phones and laptops. They are used to control cars, refrigerators, military hardware, toys and power plants. A global chip shortage triggered by the COVID pandemic kept products like Ford F-150 pickups and Sony PlayStations out of customers' and revealed just how vulnerable global supply chains are.

The TSMC expansion comes weeks after of Micron's $20 billion "megafab" investment in New York announced in October, which ultimately could reach $100 billion, and Intel's announcement of $20 billion in two new fabs outside Columbus, Ohio, which also could reach $100 billion investment this decade.

More disruptions are possible. Russia's invasion of Ukraine showed that political borders aren't necessarily fixed. That has particular importance to Taiwan, the island nation that China claims as its own and that's home to most of TSMC's manufacturing.

Related video: 'A really significant milestone': Biden to visit Arizona chip maker facility

Duration 3:52

View on Watch

All these forces combined to nudge Congress into passing the CHIPS and Science Act. It promises nearly $53 billion in subsidies for fabs, research into the semiconductor technology that underpins processors and spending to train future workers. And it's a much more assertive industrial policy than the US had in the past, when most chipmaking moved overseas to its current stronghold in Asia.

"We saw during the pandemic that something that we took for granted, global supply chains, were actually a key vulnerability for economic and our national security," Ronnie Chatterji, acting deputy director for industrial policy at the White House's National Economic Council, said in a press briefing.

Biden lobbied for the CHIPS funding and has touted it often as a success in rebuilding US manufacturing abilities. The idea is to try to encourage private companies to make their own investments knowing they'll find an economically favorable climate.

"This is a marked departure from the economic philosophy that has governed for much of the last 40 years in this country," said Brian Deese, director of the National Economic Council. With the old strategy, "you said that government should get out of the way, cut taxes for large companies, cut regulations, and assume that the American economy American families would benefit."

The new policy can mean a subsidy of about $3 billion to boost fab construction that otherwise costs about $10 billion. That makes the US more competitive with Asian countries like Taiwan, South Korea and China, Intel CEO Pat Gelsinger has said. Intel has a major presence in Chandler, immediately next to Phoenix, and is building $20 billion in new fabs there.

Building fabs takes a long time. TSMC broke ground on its 5nm fab in April 2021, and it won't start producing chips until 2024. The newly announced 3nm fab won't make chips until 2026.

TSMC's Arizona fabs will employ about 10,000 people overall, 4,500 of them working directly for TSMC. In addition, building the fabs employs more than 10,000 construction workers, the company said.

In addition to the over 10,000 construction workers who helped with construction of the site, TSMC Arizona's two fabs are expected to create an additional 10,000 high-paying high-tech jobs, including 4,500 direct TSMC jobs. When complete, TSMC Arizona's two fabs will manufacture over 600,000 wafers per year, with estimated end-product value of more than $40 billion.

One big fan of TSMC's expansion is Nvidia, which relies on TSMC to manufacture its graphics chips and AI accelerators. "Bringing TSMC's investment to the United States is a masterstroke and a game-changing development for the industry," CEO Jensen Huang said in a statement.

Deese and Chatterjee stopped short of promising that the new investments would benefit from the CHIPS funding. Details of how to apply won't even arrive until the first quarter of 2023. But they pointed to comments from chip manufacturing executives who touted the legislation as a reason for their US investments.

"The passage of the CHIPS and Science Act was absolutely critical in providing the long-term certainty for companies like TSMC to expand their footprint and really expand their investment commitment to the United State," Deese said.