TSMC to Build Chip Plant in Arizona With Government Support – Yahoo Finance Australia

Posted: May 14, 2020 at 5:42 pm

(Bloomberg) -- Taiwan Semiconductor Manufacturing Co. is planning to build a multibillion-dollar chip plant in Arizona, a potential realignment of global trade designed to allay U.S. concerns over supply chain security.The Taiwanese company is negotiating a deal with the administration of President Donald Trump to manufacture semiconductors in the U.S. to create jobs and produce sensitive components domestically for national security reasons, according to people familiar with the situation. Talks have been progressing swiftly in recent days and an announcement could come as early as Friday, according to the people, who asked not to be identified because the deal is not public yet.

We are now actively evaluating the U.S. fab plan, TSMC Chairman Mark Liu said on a recent analyst conference call, referring to fabs, the industry term for chip factories. There is a cost gap, which is hard to accept at this point. Of course, we have -- we are doing a lot of things to reduce that cost gap.

TSMC is the largest and most advanced maker of chips for other companies. Its factories, which are primarily located in Taiwan, produce important components designed by Apple Inc. and most of the largest semiconductor companies, including Qualcomm Inc., Nvidia Corp., Advanced Micro Devices Inc. and Chinas Huawei Technologies Co. That makes TSMC a crucial part of many electronic devices, such as smartphones, laptops and servers running the internet, and corporate and government computer networks.An agreement would call for TSMC to build a plant in Arizona by 2023, according to the people. Its unclear what type of support the project will get from the federal government or the state of Arizona.

A cutting-edge fab is expensive to build. TSMC spent NT$500 billion ($17 billion) to build an advanced facility in the southern Taiwanese city of Tainan that will churn out components for new iPhones this year. It plans another $16 billion in capital spending this year.

If the federal government provides cash for a U.S. plant, itll mark a shift in policy and rhetoric from a Republican administration. Trumps White House has rarely supported such direct industrial intervention, favoring market dynamics. However, emerging trends may be forcing a reconsideration. The U.S. government is already giving or lending billions of dollars to keep companies afloat in the midst of a pandemic-fueled recession. The crisis has also highlighted how vulnerable global supply chains are to such shocks.

Meanwhile, Trump has attacked international trade deals and tried to limit Chinas access to semiconductor technology. A TSMC deal to bring high-skilled work to Arizona may help Trumps re-election prospects this year. However, a similar government-backed effort with Foxconn in Wisconsin has so far not created as many jobs as expected.

Read more: Foxconn Factory Subsidy Estimate Slashed by Wisconsin Agency

Shares of Applied Materials Inc., Lam Research Corp. and KLA Corp. rose on optimism that these U.S.-based providers of chipmaking equipment may face fewer export controls when supplying TSMC.

By producing chips for many of the leading tech companies, TSMC has amassed the technical know-how needed to churn out the smallest, most efficient and powerful semiconductors in the highest volumes. Concentrating such valuable capabilities in the hands of one company in Asia, is a concern for the U.S., especially when, across the Strait of Taiwan, China is rushing to develop its own semiconductor industry.

TSMCs local rival, GlobalFoundries Inc., has given up on advanced manufacturing and Intel Corp., the worlds largest chipmaker, mainly manufactures for itself. Its attempt to become a so-called foundry, has failed to gain major customers. TSMCs only other significant challenger is South Koreas Samsung Electronics Co.

(Updates with details on Wisconsin project in eighth paragraph.)

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TSMC to Build Chip Plant in Arizona With Government Support - Yahoo Finance Australia

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