TAIPEI/PALO ALTO, U.S. -- Taiwan Semiconductor Manufacturing Co., the world's biggest contract chipmaker, has announced it will build a $12 billion cutting-edge chip factory in the U.S. state of Arizona in a move aimed at addressing Washington's concerns over supply chains and national security.
"This project is of critical, strategic importance to a vibrant and competitive U.S. semiconductor ecosystem that enables leading U.S. companies to fabricate their cutting-edge semiconductor products within the United States and benefit from the proximity of a world-class semiconductor foundry and ecosystem," TSMC said in a statement on Friday.
The announcement comes as the U.S., which is fighting to contain the coronavirus outbreak, ratchets up its rhetoric against China. Addressing America's dependence on overseas supply chains, U.S. President Donald Trump on Thursday said, "We should not have a supply chain, we should have all of them in the United States."
The planned facility will utilize TSMC's 5-nanometer chip production technology, which is currently the most advanced in the world. TSMC is separately set to begin production of 5nm chips in its facility in the southern Taiwanese city of Tainan this quarter, to supply the next generation of flagship 5G iPhones. TSMC's total spending on the Arizona project, including capital expenditure, will be approximately $12 billion from 2021 to 2029, the company said.
The Arizona plant will mark TSMC's first chip production site in the U.S. in more than two decades. The company has just one U.S. factory, in Washington state, which went into operation in 1998. Most of TSMC's chip production is in Taiwan, where the semiconductor titan has said it is more cost-effective and efficient to operate.
Sources close to TSMC said the coronavirus outbreak has caused the Trump administration to put more pressure on the company in hopes of luring foreign investment and thus boosting the economy ahead of the presidential election in November. Washington has been urging TSMC to build an advanced chip plant on American soil since last year.
"Trump will definitely hope some key tech players, especially in chip production, will commit to important investments in the U.S. to answer that 'made in America' call right before the election," Arisa Liu, an analyst with Taiwan Institute of Economic Research told the Nikkei Asian Review. "In the post-coronavirus era, it will become more urgent for the U.S. to bring crucial chip supply chains back ... The ultimate goal for the U.S. is to continue taking the lead technology and not let China catch up."
Secretary of State Mike Pompeo applauded the move on Twitter, writing: "The U.S. welcomes TSMC's intention to invest $12B in the most advanced 5-nanometer semiconductor fabrication foundry in the world. This deal bolsters U.S. national security at a time when China is trying to dominate cutting-edge tech and control critical industries."
Meanwhile Arizona Gov. Doug Ducey said he was "incredibly proud" that his state had been chosen as the site for the new plant, adding that TSMC "chose Arizona for our unbeatable business climate, already thriving tech sector and ready access to an international supply chain."
Construction of the plant is scheduled to start in 2021, with production slated to begin in 2024, the company said. It will have a planned capacity of 20,000 wafers per month and is expected to create more than 1,600 high-tech professional jobs directly and thousands of jobs indirectly in the semiconductor supply chain, the company said.
TSMC also has a $3 billion factory in Chinese city of Nanjing to address the rapidy growing market locally. The factory went into operation in 2018 and turns out 16-nanometer chips, which are roughly three generations behind the 5-nanometer version. The smaller the nanometer size, the more advanced the chip.
TSMC Chairman Mark Liu in April told investors that the company was "actively" evaluating a new plant in the U.S., marking a change in his previously conservative attitude towards the idea.