After years of planning and challenges, Taiwan Semiconductor Manufacturing Co. (TSMC) will begin mass production at its advanced chip facility in Phoenix, Arizona, in 2025. The new plant marks a significant move in U.S. semiconductor production and tests whether the 2022 CHIPS and Science Act can strengthen the semiconductor supply chain for the U.S. and its partners.
In late October 2024, TSMC reported that the yields at its Arizona plant were 4% higher than those at its plants in Taiwan. This is an encouraging sign. The Arizona facility will produce chips using the 4-nanometer process, the same technology that powers Nvidia’s most advanced GPUs. A second fab, expected to be operational by 2028, will focus on 2- and 3-nanometer chips. TSMC also plans to open a third fab in the U.S. in the future to support more advanced chip production.
The U.S. government is providing $6.6 billion in CHIPS Act funding for the first Arizona fab, but TSMC’s decision to build the plant is about more than just government support. The company supplies 90% of the world’s advanced chips, and U.S. tech giants like Apple, Nvidia, and Google depend on these chips. The global chip shortages during the pandemic and rising tensions between China and Taiwan have made U.S. companies and policymakers wary about relying solely on Taiwan for chip production.
TSMC’s move to Arizona also reflects its efforts to reduce risks associated with its dependence on Taiwan. The company has already opened fabs in Japan and is building one in Germany. As TSMC expands its global footprint, it reduces the threat of geopolitical instability affecting its production, which benefits the U.S. and its allies.
Building the Arizona plant hasn’t been easy. There have been issues with training American workers in Taiwan, and cultural differences between Taiwanese and American employees have led to some friction. American engineers have struggled with the strict, top-down structure at TSMC, while Taiwanese workers have expressed concerns about the work ethic of their U.S. counterparts.
This type of cultural gap was expected, but it highlights the difficulties of setting up a new facility in a foreign country. TSMC also faced challenges with U.S. building codes and permitting processes, which differ from those in Taiwan.
