February 3, 2023

Money News PH

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Apple will use American-made chips from TSMC’s new Phoenix factory

Apple plans to start using American-made processors after opening an advanced new chip factory in Phoenix, Arizona.

For the plant’s customers, which also include AMD and NVIDIA, the new facility means a more secure supply of chips and shorter production times. Chipmaker TSMC also announced today that it will begin construction of a second factory in Phoenix next year, increasing the site’s annual output.

“These chips will power iPhones and MacBooks, as Tim Cook can confirm,” President Joe Biden said Tuesday at an event outside the Arizona factory. “Apple had to buy all advanced chips from overseas. Now we will do more of their supply chain here at home.”

Biden and Apple CEO Tim Cook were in North Phoenix for TSMC’s “tool-in” ceremony, which marked the arrival of production equipment at the first facility.

“A feat and a game changer for the industry”

The factory is a large, modern building surrounded by newly paved streets and cacti that survived the bulldozers in the desert. At its first public event, TSMC welcomed customers, employees, local leaders and journalists to see its new factory, or at least the outside of it.

TSMC is a dedicated foundry, meaning it builds the chips designed by other companies. Apple, AMD and NVIDIA are among the largest customers, and even Intel relies on TSMC to make the most advanced processors.

The first Phoenix factory will produce 4nm processors (improved over the originally disclosed 5nm processors), with production scheduled to begin in 2024. The second fab will come online in 2026 and produce 3nm chips, which are the smallest and most complex processors in production today.

All in all, TSMC said it will invest $40 billion in its Arizona capacity, among the largest foreign direct investments ever made in U.S. manufacturing. The two fabs will produce more than 600,000 wafers annually through 2026, which White House officials say will be enough to meet all US demand for advanced chips.

Top executives from Apple, AMD and NVIDIA confirmed on Tuesday that they would be among the first customers to buy chips from the new Arizona factories.

“TSMC has become a global platform on which the global technology industry is built,” said NVIDIA CEO Jensen Huang. “Bringing TSMC’s investment to the United States is a feat and a game-changing development for the industry.”

TSMC's first factory in Phoenix, Arizona.

TSMC’s first factory in Phoenix, Arizona.

The afternoon featured a series of speakers that gravity pounded from TSMC to Arizona. TSMC employees in red shirts lined a crowd of about 200 people and the speeches were so numerous that there was even a break with a champagne toast to break things up.

Secretary of Commerce Gina Raimondo, Arizona Senator Mark Kelly and other members of the Arizona congressional delegation also attended the ceremony. They were joined by business leaders such as Micron CEO Sanjay Mehrotra, Microchip CEO Ganesh Moorthy and TSMC founder Morris Chang.

TSMC customers didn’t reveal how many chips they plan to buy from these fabs, but at 3nm and 4nm, the Arizona chips will be more advanced than what they’re currently using. Apple’s A16 chips used in the iPhones 14 Pro and Pro Max and the M2 chips for MacBooks are both manufactured using 5nm process technology.

By the time these Arizona fabs are both operational, however, TSMC will already be producing more advanced chips at overseas facilities. According to Nikkei Asia, the company plans to produce 2nm chips by 2025.

“The advancement we’ve made with Apple Silicon has transformed our devices,” Cook said Tuesday. “If you stop and think about it, it’s amazing what chip technology can do. And now, thanks to the hard work of so many people, these chips can proudly be stamped Made in America.”

The US is in the midst of a semiconductor manufacturing revival

The US is in the midst of a semiconductor manufacturing revival, inspired in part by the tangled supply chains of the Covid pandemic. The vast majority of the world’s semiconductors are manufactured in Asia, with the US producing about 10 percent of the world’s semiconductors.

Apple has been working to expand its supply chain beyond China in recent years to avoid potential disruptions in the future. It now produces some iPhones in India and intends to expand MacBook and Apple Watch production to Vietnam. The TSMC factories will not mean full iPhone production in the US, but they will supply critical components used in Apple products.

Semiconductor shortages cost Apple about $6 billion in lost sales, and the company recently said it would buy more chips from European and US factories to address supply issues.

Recently, American politicians have pushed for outsourcing production to avoid dependence on other nations.

This reshoring energy culminated in the CHIPS and Science Act, a $52 billion bill for domestic chip production. Biden signed the bill into law in August, but funding has yet to be disbursed.

The Commerce Department will allocate the money through its Chips for America program beginning next year. Foreign companies are eligible for these incentives as long as they build US manufacturing capacity, and TSMC has already publicly stated that it will apply for CHIPS funding.

Biden came to Phoenix to promote US manufacturing and the CHIPS and Science Act.

Biden came to Phoenix to promote US manufacturing and the CHIPS and Science Act.

Even without CHIPS funding, several large semiconductor projects are underway.

Intel, America’s largest chipmaker, has its largest manufacturing facility in Chandler, a large suburb of Phoenix. The company is making progress on a $20 billion expansion at its Chandler campus, which will be fully operational in 2024.

Intel also plans to build “the world’s largest silicon manufacturing site” in Ohio, starting with a $20 billion investment. Intel hasn’t revealed exactly what it will build in Ohio just yet, but production is set to begin in 2025.

Micron, which makes memory and memory chips, said in October it would spend up to $100 billion to build a “megafab” in New York. In Texas, Samsung is investing $17 billion to expand its Austin facilities in hopes of competing with TSMC.

Chang, the founder of TSMC, said during his speech that he had long dreamed of building in America, and current TSMC chairman Mark Liu is finally bringing that dream to life.

“My dream of 25 years ago is now being fulfilled by Mark.”

Photography by Andy Blye.