TSMC could be planning a huge fab expansion in Arizona

Shawn Knight

Posts: 13,439   +132
Staff member
The big picture: Chipmakers are investing money hand over fist in an attempt to alleviate the ongoing chip shortage, but even with all of the money in the world, time is the biggest enemy. Some, like Intel CEO Pat Gelsinger, believe it could take a couple of years before they're able to catch back up with demand.

Taiwan Semiconductor Manufacturing Company (TSMC) is planning to build several additional chipmaking factories in Arizona.

The chipmaker, if you recall, announced in May 2020 that it would spend $12 billion to construct a new factory in Arizona. Upon completion, the factory is expected to turn out 20,000 semiconductor wafers per month on a 5nm process and create some 1,600 high-tech jobs.

Anonymous sources reportedly familiar with the matter told Reuters that TSMC is preparing to build up to five additional fabs in Arizona. Sources didn’t say how much additional production capacity the new fabs would bring to the table, nor did they mention what manufacturing technology they will utilize.

Two sources told Reuters that TSMC has its sights set on building six fabs. One person said the construction will happen over the next three years, but the publication was unable to independently confirm that timeline (It's unclear if they meant six new fabs, or six fabs total including the one already announced).

Just last month, TSMC announced plans to spend $100 billion over the next three years on expansion and R&D projects, and yesterday, Intel said it would spend $3.5 billion to upgrade its chip production facilities in New Mexico.

“Once there is any official decision, we will disclose it accordingly,” TSMC said when probed for comment by Reuters.

Image credit Ascannio, Quardia

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QuantumPhysics

Posts: 5,222   +5,920
And that's how the free market works.

#1 Demand outstrips supply.
#2 The market reacts by building more manufacturing in order to meet Demand.
#3 Someday there will be enough chips for everybody!

But the question is, why are they building in Arizona?

well, as America's currency loses value (due to Money Machine going brrrrrr) it becomes cheaper for other countries to build factories in America.

Unfortunately, they are using our useless cash to buy up our properties and eventually many of Generation Z and Alpha will be renters for life and never own jack.
 

maxxcool7421

Posts: 39   +62
In three years the wafer capacity wont be needed. Those same plants will go low schedule or full idle inside of 5 years.

The current ''demand'' is not sustainable. It only spiked due to Covid, work from home and crypto. But with vaccines, and some popular cryptos going away from proof of work (hashing) the demand will drop in 2 years or less.
 

Plutoisaplanet

Posts: 527   +786
And that's how the free market works.

#1 Demand outstrips supply.
#2 The market reacts by building more manufacturing in order to meet Demand.
#3 Someday there will be enough chips for everybody!

But the question is, why are they building in Arizona?

well, as America's currency loses value (due to Money Machine going brrrrrr) it becomes cheaper for other countries to build factories in America.

Unfortunately, they are using our useless cash to buy up our properties and eventually many of Generation Z and Alpha will be renters for life and never own jack.
Here's some more context based on their earnings call:
TSMC referred to comments by CEO C.C. Wei on an earnings call last month, saying the company was starting chip production in Arizona in 2024 with a 20,000 wafer per month 5-nanometer technology.
"But in fact, we have acquired a large piece of land in Arizona to provide flexibility. So further expansion is possible, but we will ramp up to Phase 1 first, then based on the operation efficiency and cost economics and also the customers' demand, to decide what the next steps we are going to do."
 

yRaz

Posts: 3,807   +3,927
In three years the wafer capacity wont be needed. Those same plants will go low schedule or full idle inside of 5 years.

The current ''demand'' is not sustainable. It only spiked due to Covid, work from home and crypto. But with vaccines, and some popular cryptos going away from proof of work (hashing) the demand will drop in 2 years or less.
Maybe, but I feel like demand will only increase because of how we are integrating tech into everything. And the chip shortage wasn't impacted as much by covid as some people suggest. The fabs were still running at max capacity. So much so that they started bringing older equipment back online to keep up demand where nm size wasn't critical.
 

Theinsanegamer

Posts: 2,661   +4,137
In three years the wafer capacity wont be needed. Those same plants will go low schedule or full idle inside of 5 years.

The current ''demand'' is not sustainable. It only spiked due to Covid, work from home and crypto. But with vaccines, and some popular cryptos going away from proof of work (hashing) the demand will drop in 2 years or less.
I agree that the current demand is a peak, but OTOH I feel that post Covid levels will still be higher then pre covid levels. On top of filling the monumental backorders, there's still a huge console generation to build, delayed PC upgrades, delayed business upgrades, and some new exciting hardware coming out like zen 4 and rdna 3.

On top of ALL that though, there is strategy here. If china gets bullish on taking taiwan (or god forbid, actually does it) TSMC needs an exit strategy. I present to you: TSMC's backup strategy. get you fabs the hell out of dodge while you can. That is exactly what TSMC is doing.
 

Danny101

Posts: 1,831   +790
Six sounds like a lot. Maybe later as demand wanes AMD, Google, Apple, and the like can buy one.
 

ferrellsl

Posts: 54   +53
And that's how the free market works.

#1 Demand outstrips supply.
#2 The market reacts by building more manufacturing in order to meet Demand.
#3 Someday there will be enough chips for everybody!

But the question is, why are they building in Arizona?

well, as America's currency loses value (due to Money Machine going brrrrrr) it becomes cheaper for other countries to build factories in America.

Unfortunately, they are using our useless cash to buy up our properties and eventually many of Generation Z and Alpha will be renters for life and never own jack.

Why not Arizona? Arizona is already home to the world's largest electronics distributor, Avnet, and Intel and Apple built chip-fab plants in the metro-Phoenix area years ago. And there are over 2 million residents (and growing) in the metro-Phoenix area who have the education and skills to staff more of these plants. There's a misconception that Arizona is a desert wasteland which is patently false. Arizona is much like California without the beaches, high taxes, and left-wing politics so it's a natural fit for more high tech industrial development by domestic and foreign corporations. Just makes good business sense if like most businesses you want to maximize productivity and profits.
 

umbala

Posts: 399   +564
In three years the wafer capacity wont be needed. Those same plants will go low schedule or full idle inside of 5 years.

The current ''demand'' is not sustainable. It only spiked due to Covid, work from home and crypto. But with vaccines, and some popular cryptos going away from proof of work (hashing) the demand will drop in 2 years or less.
This is complete nonsense. I mean, TSMC is investing a hundred billion dollars in something that won't be needed in 5 years? Yeah, these companies are real dumb with money, but random guy on the internet, *HE* knows what's up!
 

mbrowne5061

Posts: 1,910   +1,109
..But the question is, why are they building in Arizona? ...
Cheap solar power, plentiful skilled labor, building in the target market bypasses tariffs and import taxes, friendly corporate environment, politically stable climate (compared to Taiwan and SEA), potential access to lucrative DOD contracts (primary or sub) now that you have US-based fabs, proximity to US silica and other rare earth mines that are only now just being exploited for the first time. I can go on, if you like?

...well, as America's currency loses value (due to Money Machine going brrrrrr) it becomes cheaper for other countries to build factories in America...

Potentially true, as long as other currencies also gain value at the same time. Exporting labor like that only makes sense when you export from the market with the stronger currency, into one with a weaker currency. The concerns surrounding inflation are global, not regional, right now, since everyone turned on their money printers during Covid.

Unfortunately, they are using our useless cash to buy up our properties and eventually many of Generation Z and Alpha will be renters for life and never own jack.
The wonderful thing about US property law is you don't own the property, at all, unless congress votes in favor of giving you a land grant. What you buy instead of "real estate" which is just a document that gives you the exclusive right to use the piece of land it is attached to, and only while the government allows it - they'll really only take it away if break the law, fail to pay your taxes, are a foreign national of a country we just went to war with, etc.

But you aren't wrong about the renting. IMO, there should be a very heavy tax applied to any home where it sits unoccupied for more than 180 days or has more than 12 different sets of occupants in a year. Heavy enough to completely eat up any capital gains or rental income associated with the property. The 180 days is still slightly less than half a year, so the upper middle class (what's left of them, anyway) can still have their second homes, and the 12 sets of occupants still allows month-to-month rentals that target people who need to travel for work. Both together though tamp down on those unlicensed hotels on AirBnB, as well as people who collect houses just to rent them out (or sit on them as investments)