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World’s biggest chipmakers heading to the US

(ATF) The two biggest chipmakers in Asia are setting up shop in the United States. TSMC – Taiwan Semiconductor Manufacturing Co – has got a legal go-ahead to build a semiconductor plant in Phoenix, and Samsung Electronics is headed in the same direction with similar multi-billion-dollar plans.

Indeed, they might even end up as neighbours in the US state of Arizona, where TSMC, the leader in this sector – and first-mover in this transnational shift – is reported to have bought a parcel of land for $89 million.

The TSMC plant, in Phoenix, involves initial spending of about $3.5 billion and up to $12 billion all up over the next decade. Mass production is due to start at the site in 2024.

Meanwhile, news emerged on Wednesday (March 3) that Samsung Electronics, is considering two sites in Arizona and others in New York and Austin, Texas. The Korean conglomerate already has a chip plant in Austin, although that site is reported to have shut down because of the savage winter storm that hit the state recently and may not resume production for a couple of weeks.

Samsung Electronics has said it could outlay as much as $17 billion on a new US plant, according to documents filed with officials in Texas. It is seeking combined tax abatements of about $1.5 billion over 20 years from Travis County in Texas and the city of Austin, according to documents dated February 26, Reuters reported on Wednesday.

Samsung is in talks about a new chip plant at sites in Arizona and New York, with each offering property tax abatement and “significant grants and/or refundable tax credits” to fund infrastructure improvements, the documents said.

The new plant Samsung plans to build would produce “advanced logic devices” for Samsung’s chip contract manufacturing business, and could create 1,800 jobs, according to previous papers filed with Texas officials.

News of these developments might be watched with some envy in China, where the government has gone to great lengths to create its own chipmaking facilities. However, Beijing – which spent more on imported computer chips last year than it did on oil imports – has had limited success to date, despite pouring billions into efforts in various provinces.

News emerged this week that officials in Wuhan have pulled the pin on Hongxin Semiconductor Manufacturing Company after a $20-billion fiasco. HSMC had promised to deliver China’s first 7-nanometre chips, but local officials decided last week to dismiss all employees as hopes for a resumption of business collapsed.

Surge in global demand

But things look a lot brighter for the ventures by TSMC and Samsung Electronics in the US.

Analysts say the timing could hardly be better. A global surge in demand for high-powered consumer electronics during the Covid-19 pandemic, coupled with longer-term tech fads such as 5G mobile phones and automated vehicles, is pressuring chipmakers to churn out as many semiconductors – computer chips – as they can. 

TSMC also expects full operations this year at a new complex in the southern Taiwanese city Tainan. It will specialise in making advanced chips. 

“It seems unlikely that TSMC will not expand capacity,” market analysis firm Isaiah Research in Taipei said in a statement for this report. “Under the situation that semiconductor demand is clear in the future, if TSMC does not expand capacity, the global chip supply will be very short.”

Both the Arizona and Tainan projects are “well on track”, a spokeswoman from TSMC’s headquarters in northern Taiwan said in February.

Global attention is focused on TSMC because of its scale. The 34-year-old company with a $265-billion market cap pumps out at least 1.5 times more chips than the world No-2 supplier Samsung, Isaiah Research believes.  

TSMC has more advanced processing technology than most peers, including 5-nanometre nodes and smaller ones in the pipeline. Smaller nodes mean chips run on less power without sacrificing speed.

Remote study and telework, two trends that exploded during the 2020 coronavirus outbreak because of stay-at-home orders, raised demand for speedy notebook PCs with high-end cameras.

Sector tipped to grow 33% by 2024

Worldwide demand for chips is expected to increase from $450 billion last year to about $600 billion in 2024, market research firm Gartner says.

“The semiconductor manufacturing industry is very competitive, so TSMC will continuously grow and open branches globally in order to compete,” forecasts Sean Su, an independent political and tech consultant in Taipei. 

TSMC said in February it planned to raise $9 billion in debt pay for its expansion projects. 

The company is already hiring for the Arizona location, according to a current list of 16 engineering, specialist and managerial jobs on the TSMC website. The project will employ 1,600 people and spin out up to 20,000 wafers per month, TSMC said in a news release in May 2020. 

TSMC will spend $12 billion on the project from this year through till 2029, it said. 

Arizona production will cover chips for spacecraft, satellites and aircraft for government use, Isaiah Research predicts. And If Intel, a Silicon Valley microprocessor builder, eventually decides to outsource central processing units in TSMC, Isaiah Research says, “the capacity in this fab may be expanded more than the original plan.”

The governments of former US presidents Barack Obama and Donald Trump have urged American firms to do more manufacturing at home and save domestic jobs. Analysts believe their foreign contractors are eyeing US sites to keep up with the government agenda.

The administration of current President Joe Biden has asked the Taiwan government to push chipmakers to step up chip production amid a shortage of semiconductors for automotive use, major media outlets reported in February.

Without a TSMC plant in the United States, the US government must rely on imports of advanced chips from overseas foundries, which is seen as a risk to US “national security”, Wen Liu, an industry analyst with the Market Intelligence & Consulting Institute in Taipei, said. 

TSMC broke ground in 2018 on its new NT$500-billion factory complex in the Southern Taiwan Science Park. Volume production at all three project phases combined will reach full force this year, TSMC has said in statements. 

The complex will produce more than 1 million wafers, offer 4,000 “high-quality” jobs and become “another bastion of TSMC’s manufacturing excellence”, TSMC said in 2018. The new Taiwanese complex use the 5-nanometer process to make advanced chips. 

“With a complete supply-chain cluster and excellent talent pool, Taiwan will still be the first priority for TSMC when it comes to production capacity expansion due to lower production costs and national defense security concerns,” Liu said.

With reporting by Reuters

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