TSMC's Arizona chip plant is behind schedule, over budget and the subject of controversy on online forums – and now an analyst says it is and will be little more than a useless paperweight even when it finally begins production.
Not only will it produce chips for older Apple devices, but it won't even be able to complete the process of making them without shipping their. back to Taiwan for final assembly…
History of the TSMC chip plant in Arizona
It was all supposed to be a win-win. The US Chip Act successfully convinced TSMC to build a chip plant in Arizona that produces chips for Apple devices (albeit only older ones). TSMC receives part of the money to subsidize the new plant; Apple gets positive press for buying American-made chips; and jobs are created for American workers.
None of this is going well. TSMC wants more subsidies and fewer regulations. The project is behind schedule and over budget, and production has already been pushed back to 2025 rather than 2024. There is talk that American-made chips will cost more than chips made in Taiwan, meaning Apple will likely only buy a token number of them.
Job creation in the US is in doubt as TSMC wants to hire about 500 Taiwanese workers to speed up construction work. American trade unions, naturally, are unhappy with this and are petitioning for a refusal to issue Taiwanese work visas. Finally, this whole dispute now seems to be creating animosity between American and Taiwanese citizens.
Final assembly of the chips will take place in Taiwan
A new report from The Information says that while Apple chips may be manufactured in the US, they will still need to be shipped back to Taiwan before they are delivered to where somewhere near your Apple device.
The Arizona plant, which has been the center of Biden's plan and would cost $40 billion to build, will do little to ensure U.S. independence in chip manufacturing. That's because many advanced chips made in Arizona for Apple or other clients such as Nvidia, AMD and Tesla still require assembly in Taiwan in a process known as packaging, according to interviews with numerous TSMC engineers and former by Apple employees.
Packaging is the name for the process of placing different circuit boards as close together as possible before encapsulating them into a single chip. For example, the iPhone places memory directly above the processor to improve performance and reliability.
Packaging is a very complex process in which TSMC is far ahead of its competitors, but this process can only be completed in sophisticated factories that only exist in Taiwan.
This makes the plant a useless paperweight, says the analyst
Top comment by KJ705
Construction of this type of facility requires huge expenditures [of capital] , time and effort, and it's really so unlikely that TSMC will want to do this anytime soon in the Arizona desert…
Well… a little history more difficult; it may not matter what TSMC wants in the end.
U.S. intellectual property is used at every stage of the chip manufacturing process. The Biden administration has expanded use of a new export control method pioneered by the Trump administration (both aimed at China).
The United States has a national security imperative to manufacture advanced microchips in the United States. Overall this is a “cost doesn't matter” type of need. There is a limited market with ongoing potential for anyone to stay on the cutting edge. And it is possible to control the access of all other inhabitants of the planet to this advanced technology. The US is going to vertically expand chip production.
If they can't achieve this with TSMC, then the US will either find a solution with the help of a local partner or start production on its own (at huge cost, of course). Due to the amount of equipment needed, pressing national security needs, and the limited manufacturing capacity of these tools, it is possible that export controls could be used to ensure that any government partner or service tasked with this task has the ability to purchase years worth of the most advanced tools, effectively excluding all others.
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An analyst at one chip research firm says this effectively forces the US to install a paperweight – a completely useless tool when it comes to reducing America's dependence on Taiwan.
With TSMC struggling to even build chip production for older technologies, there doesn't seem to be any prospect that it will ever try create chip packaging plants in the US.
“Building this type of facility requires a huge amount of [capital], time and effort, and it does not seem likely that TSMC will want to do this soon in the Arizona desert, especially given all the challenges the firm has faced so far with construction, costs and personnel, said Paul Triolo, senior vice president for China at consultancy DGA-Albright. Stonebridge Group.
Both Apple and TSMC declined to comment on the report.
Photo: Si-ming Lee/CC2.0