TSMC will build third Arizona fab after winning $6.6B in CHIPS funding

The US Department of Commerce has proposed another round of CHIPS Act funding up to $6.6 billion for Taiwan Semiconductor Manufacturing Company (TSMC), which President Joe Biden hopes will "support the construction of leading-edge semiconductor manufacturing facilities right here in the United States."

With this award—which includes additional funding up to $5 billion in low-cost government loans—TSMC has agreed to increase funding in Arizona fabrication plants to $65 billion. That's the largest foreign direct investment in a new project in US history, the Commerce Department said, and it will fuel construction of TSMC's third Arizona fab.

According to Biden, "these facilities will manufacture the most advanced chips in the world," putting the US "on track to produce 20 percent of the world’s leading-edge semiconductors by 2030."

By 2025, TSMC's first Arizona fab will begin high-volume chip production, but TSMC won't be producing "the world’s most advanced 2nm nanosheet process technology" until its second fab is operational in 2028. That technology, the Commerce Department said, will allow the US to domestically power "the AI boom and other fast-growing industries like consumer electronics, automotive, Internet of Things, and high-performance computing."

"At full capacity, TSMC Arizona’s three fabs would manufacture tens of millions of leading-edge chips that will power products like 5G/6G smartphones, autonomous vehicles, and AI datacenter servers," the Commerce Department said.

TSMC's third fab is also planned to "produce 2nm or more advanced process technologies," the Commerce Department said, "depending on customer demand" of key TSMC-dependent companies like AMD, Apple, Nvidia, and Qualcomm.

“One of the key goals of President Biden’s CHIPS and Science Act was to bring the most advanced chip manufacturing in the world to the US, and with this announcement and TSMC’s increased investment in their Arizona campus, we are working to achieve that goal,” US Secretary of Commerce Gina Raimondo said in a press release. "The leading-edge semiconductors that will be made here in Arizona are foundational to the technology that will define global economic and national security in the 21st century, including AI and high-performance computing."

But analysts told the Financial Times that the US is still moving too slowly to become a global chip leader. One engineer told FT that by 2028, "Nvidia and other AI chip vendors are likely to have migrated to 2nm" process technology, ahead of the TSMC Arizona fabs reaching that goal. In January, TSMC Chairman Mark Liu told investors that Taiwan-based fabs "will start 2nm mass production next year" and that the company has "plans to build 'multiple' more fabs operating on that technology" in Taiwan, FT reported.

It appears that TSMC's key customers would still have a choice as to whether to purchase chips from Taiwanese fabs rather than US fabs. Currently, FT reported, 90 percent of cutting-edge chips are made in Taiwan.

In the Commerce Department's press release, Liu provided a statement saying that TSMC's "US operations allow us to better support our US customers, which include several of the world’s leading technology companies. Our US operations will also expand our capability to trailblaze future advancements in semiconductor technology.”

But this year, Liu has blamed delays at TSMC Arizona fabs on a supposed lack of specialized workers, pushing back promises to produce the most advanced chips in the US from 2026 to 2027 or, more likely, 2028.

The addition of a third Arizona fab, the Commerce Department said, promises even more jobs that will need to be filled, including "approximately 6,000 direct manufacturing jobs, more than 20,000 accumulated unique construction jobs, and tens of thousands of indirect jobs in this decade."

The Arizona Building and Construction Trades Council (AZBCT) has pushed back on TSMC's claims that there aren't enough workers locally, striking a deal with TSMC in December that requires TSMC to develop a training program and hire Arizona workers.

To that end, today's agreement with TSMC includes a proposed "$50 million in dedicated funding to develop the company’s semiconductor and construction workforce" that can support TSMC's projects.

According to the Commerce Department, TSMC has already teamed up with the city of Phoenix to establish a registered apprenticeship program for semiconductor technicians. And moving forward TSMC will collaborate with engineering programs at universities around the country to train more workers. Anyone joining TSMC's fabs, the Commerce Department said, will "have access to discounts, reimbursements, and priority enrollment through partnerships for local area early education and childcare centers."

Biden said this funding will ensure that "workers don’t have to leave their hometowns to find good-paying jobs in innovative industries."