Taiwanese group to build $12bn chipmaking plant in US

Taiwan Semiconductor Manufacturing, the world’s biggest contract chipmaker, is planning to build a $12bn factory in the US, marking a victory for Donald Trump’s campaign to boost domestic production of essential technologies.

The move by TSMC, which controls half of the world’s contract chipmaking industry and supplies companies such as Apple and Huawei, comes as the White House has become increasingly concerned that the US is overly reliant on supply chains in Asia.

TSMC said the fabrication plant, or fab, would create more than 1,600 jobs and produce 20,000 wafers, a thin slice of silicon that is used to make products such as integrated circuits, per month. The company will use 5-nanometer technology, a sophisticated node but not the most advanced used in its newest fab in Taiwan.

Eric Sayers, an Asia security expert and adjunct senior fellow at the Center for a New American Security think-tank, said TSMC’s decision to build the plant in Arizona underscored the Taiwanese company’s intention to “play a major role in the outgrowth of an advanced microelectronic ecosystem” in the US.

“Remaining the leader in this industry will be critical to future economic and military competitiveness,” he said. “At a geopolitical level, I can’t think of a better big idea for tying the US and Taiwan together than working to ensure the free world stays the leader.”

But industry experts warned that a rushed commitment to invest in the US under political pressure ahead of the presidential election in November could be a risk for the company. Foxconn, the world’s largest electronics contract chipmaker, also from Taiwan, has struggled with negative publicity after delays in implementing a 2017 promise to invest in the US in support of then newly elected Mr Trump.

TSMC had long tried to resist pressure from Washington to build a local fab. The company had said it would consider such a step only with government subsidies because the absence of a full chip manufacturing supply cluster in the US would make costs much higher than in Taiwan.

But TSMC cited a “mutual understanding and commitment to support” from both the federal and state governments in its decision to open the Arizona facility. “U.S. adoption of forward-looking investment policies to enable a globally competitive environment for a leading edge semiconductor technology operation in the U.S. will be crucial to the success of this project,” it added, in a reference to subsidies.

A company spokeswoman added that while the company intended to build the fab, the decision was not final.

The Trump administration has been targeting TSMC in its efforts to restore domestic production of semiconductors needed for the defence industry.

The US government has also pressured Taiwan in its efforts to slow or stop China’s technological advance by restricting TSMC and other companies from selling to China.

Washington recently urged Taipei to press TSMC to restrict production of semiconductors for Huawei, the Chinese technology group which the US has accused of helping the Beijing engage in cyber espionage and accounts for about 10 per cent of TSMC’s revenues. The Trump administration has also expressed concerns that China would be able to take advantage of the Taiwanese technology as it pressed ahead with its own development of advanced semiconductors.

But Taiwanese government officials have resisted the US pressure, as they see its position as a global supplier of chips as a strategic advantage.

“TSMC, in its negotiations with the US government, needs to ensure that if they build a fab in the US, they will not be restricted in their ability to sell to any other customers from their fans elsewhere, first and foremost in Taiwan,” said Kung Ming-hsin, a cabinet minister in charge of the economy.

TSMC said the two issues were separate and it had not held any such discussions.

The Trump administration has been exploring ways to further clamp down on the Chinese technology sector, including toughening sanctions against Huawei. Officials are also keen to more limit which companies can sell to the Chinese company but have run into opposition from US chipmakers, which rely on China for about a third of their revenues.

Mr Trump may benefit politically from the decision to locate the plant in Arizona, a swing state in the November presidential election. The Republican party is also trying to avoid losing a Senate seat in the southwestern state, in a race that will be critical to determining whether they retain their majority in the upper chamber.

Michael Pompeo, US secretary of state, described the deal as a “game changer” that would enhance national security. He said the chips would be used in everything from artificial intelligence to F-35 fighter jets. 
“TSMC’s announcement comes at a critical juncture, when China is competing to dominate cutting-edge technology and control critical industries,” he said. “High-tech chips will be Made in America once again.”

The US commerce department said the investment would “reinforce American leadership in cutting-edge semiconductor design and manufacturing and will further accelerate Arizona’s rise as a global hub for the technology industry”.

The Wall Street Journal first reported the development.

Additional reporting by Kiran Stacey

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