Recent trial production at TSMC’s semiconductor facility in Arizona has reportedly matched yields from the company’s established facilities in Tainan, Taiwan. Despite prior concerns over production delays at TSMC’s facilities, the news is a positive indication that Taiwanese and US investments in American manufacturing capacity are paying off.
The yield rate, which measures how many usable chips are produced in a single process, is a sign that TSMC will be able to maintain its gross profit margin target of over 53% and reinforces the company’s statements that chips produced at its Arizona fabs will be on par with those produced in Taiwan. TSMC began pilot production of 4-nanometer processing technology at its first facility in mid-April and announced that the facility would be fully operational by the first half of 2025.
In May 2020, TSMC, the Taiwan-based leader in semiconductor production, announced that it would build a $12 billion semiconductor fabrication facility, or a fab, in Phoenix, Arizona for the production of 5-nanometer chips. Two years later, TSMC revealed plans to construct a second fab to manufacture 3-nanometer chips, more than tripling its investment in Arizona from $12 to $40 billion and upgrading chips at its first facility to 4-nanometer processes.
Since the investment announcements, however, both facilities have experienced significant workforce challenges that caused TSMC to postpone production timelines in Arizona by up to two years.
The project was re-energized in April 2024, when the Taiwanese semiconductor giant signed a non-binding preliminary memorandum of terms (PMT) with the US Department of Commerce that secured $6.6 billion in grants and up to $5.5 billion in loans under the CHIPS and Science Act for the construction of a third TSMC fab in Arizona. The CHIPS Act, enacted by the Biden administration in 2022, aims to rebuild US domestic semiconductor manufacturing capacity in response to supply chain vulnerabilities exposed during the COVID-19 pandemic.
The new investment pushed the total capital expenditure in TSMC Arizona from $40 billion to over $65 billion, making it the largest foreign direct investment (FDI) in Arizona state history and the largest FDI in a greenfield project in US history. The recent progress has put TSMC Arizona on track to produce 20% of America’s advanced logic chips by 2030, placing Arizona at the forefront of the Biden administration’s push to rebuild semiconductor manufacturing capacity in the US.
Success at TSMC Arizona facilities has not only brought cutting-edge technology to Phoenix but bolstered the economy of metropolitan Phoenix, demonstrating that Taiwanese investments are building local industries and fostering a skilled workforce.
TSMC’s investments build on Arizona’s rich history of semiconductor manufacturing. Motorola, a telecom company, laid the foundations for Arizona’s robust microelectronics and semiconductor industry in Phoenix when it began developing transistors, a type of semiconductor used in car radios, during the 1950s.
Arizona’s low risk of natural disasters, its strong educational base, and an expanding tech workforce has attracted attention from other semiconductor manufacturing giants including Intel, which, in 2011, established a fab in Ocotillo, Arizona. Since then, Arizona’s rapidly expanding semiconductor industry has attracted a diverse array of manufacturing suppliers, including Amkor Technology and Fujifilm Electronics, representing $102 billion in investments and more than 16,000 new jobs since 2020.
The Greater Phoenix Economic Council reported that TSMC Arizona’s third fab is set to create 6,000 direct high-tech, high-wage jobs, more than 20,000 construction jobs, and tens of thousands of semiconductor-related occupations. As of April 2024, the company had hired about 2,200 workers.
Taiwanese investments in Arizona’s semiconductor hub are also fostering new, local talent pipelines into the semiconductor industry. As a part of the Biden administration’s Investing in America initiative, Phoenix was designated one of five Workforce Hubs in the US, allowing local government officials to develop critical pathways into advanced manufacturing careers, such as Arizona’s first-ever Registered Apprenticeship Program.
The program, which was established by Phoenix Mayor Kate Gallego and Arizona Governor Katie Hobbs, partners with academic institutions such as the Maricopa Community College District and Arizona State University to select and train 80 technician apprentices from career and technical education programs over the course of 5 years.
Arizona Senator Mark Kelly commended the local employment opportunities created by TSMC at its second expansion announcement in 2022. “Arizonans will see thousands of high-paying jobs, many of which will not require a four-year degree, along with strong supply chains, lower costs, and a more competitive economy for the generations to come,” he said.
The success of TSMC Arizona attests to the strength of US and Taiwanese commitments toward the creation of a resilient and diverse supply chain that safeguards the stability of the semiconductor ecosystem.
Hanah Park is a Fall 2024 Young Professional at the East-West Center in Washington. Hanah is currently a student at Pomona College. Previously she was an intern at the United States Indo-Pacific Command.