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Taiwan Semiconductor Expected to Announce Arizona Factory as soon as Friday per WSJ


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Taiwan Semiconductor Manufacturing Co., TSM 2.32% the world’s largest contract manufacturer of silicon chips, is set to announce plans to build an advanced chip factory in Arizona as U.S. concerns grow about dependence on Asia for the critical technology.

The plans come as the Trump administration has sought to jump-start development of new chip factories in the U.S. due to rising fears about the U.S.’s heavy reliance on Taiwan, China and South Korea to produce microelectronics and other key technologies.

TSMC is expected to announce the plans as soon as Friday after making the decision at a board meeting on Tuesday in Taiwan, according to people familiar with the matter. The factory could be producing chips by the end of 2023 at the earliest, they said, adding that both the State and Commerce Departments are involved in the plans.

TSMC’s new plant would make chips branded as having 5-nanometer transistors, the tiniest, fastest and most power-efficient ones manufactured today, according to a person familiar with the plans. TSMC just started rolling out 5-nanometer chips for customers to test at a factory in Taiwan in recent months.

It is unclear how much TSMC has budgeted or if it would get financial incentives from the U.S. to build. A factory capable of making the most advanced chips would almost certainly cost more than $10 billion, according to industry executives.
Politically, the announcement could be a win for President Trump who has been campaigning to get companies to build in the U.S. He has also been looking to make sure that Republicans retain their majority in the U.S. Senate. Arizona Sen. Martha McSally is among the Republicans facing a tough challenge in this November’s election.
“We shouldn’t have supply chains. We should have them all in the U.S.,” the president said on Fox Business on Thursday
TSMC has had to spend big to maintain its lead in chip-making, which requires some of the world’s most complicated manufacturing tools. In January the company outlined capital expenditures of between $15 billion and $16 billion for this year.
If true, which it probably is, this is a VERY politically astute move by TSMC. They did a similar thing with the new 12nm China fab. And building it in AZ really is a poke in the eye of Intel. 5nm is a good node for sure, capacity is the real question.

The WSJ article is pay to view. Here is a free version from the Financial Post:

The funny part is that this article is a brief rehashing of the WSJ one yet they credit five people?!?!?! What a joke!

(Reporting by Stephen Nellis in San Francisco; Mike Stone and Alexandra Alper in Washington; and Karen Freifeld in New York, Editing by Franklin Paul)
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Looks like its reality now. 20k wspm in AZ on 5nm. Construction starts 2021.
Right in Intel's back yard. Wonder if that is for poaching purposes? Would have been more epic if they built it in Hillsboro , OR...

TSMC Announces Intention to Build and Operate an Advanced Semiconductor Fab in the United States
Issued by: TSMC
Issued on: 2020/05/15
Hsinchu, Taiwan, R.O.C., May 15, 2020 – TSMC (TWSE: 2330, NYSE: TSM) today announced its intention to build and operate an advanced semiconductor fab in the United States with the mutual understanding and commitment to support from the U.S. federal government and the State of Arizona.
This facility, which will be built in Arizona, will utilize TSMC’s 5-nanometer technology for semiconductor wafer fabrication, have a 20,000 semiconductor wafer per month capacity, create over 1,600 high-tech professional jobs directly, and thousands of indirect jobs in the semiconductor ecosystem. Construction is planned to start in 2021 with production targeted to begin in 2024. TSMC’s total spending on this project, including capital expenditure, will be approximately US$12 billion from 2021 to 2029. This U.S. facility not only enables us to better support our customers and partners, it also gives us more opportunities to attract global talents. This project is of critical, strategic importance to a vibrant and competitive U.S. semiconductor ecosystem that enables leading U.S. companies to fabricate their cutting-edge semiconductor products within the United States and benefit from the proximity of a world-class semiconductor foundry and ecosystem.
TSMC welcomes continued strong partnership with the U.S. administration and the State of Arizona on this project. This project will require significant capital and technology investments from TSMC. The strong investment climate in the United States, and its talented workforce make this and future investments in the U.S. attractive to TSMC. U.S. adoption of forward-looking investment policies to enable a globally competitive environment for a leading edge semiconductor technology operation in the U.S. will be crucial to the success of this project. It will also give us the confidence this and other future investments by TSMC and its supply chain companies will be successful.
In the United States, TSMC currently operates a fab in Camas, Washington and design centers in both Austin, Texas and San Jose, California. The Arizona facility would be TSMC’s second manufacturing site in the United States.
It does not say however how much the US Government is spending on this. I'm told this is a leak from Washington DC so why was that piece of information left out? It's hard to believe that TSMC is spending $12B+ to make 20k 5nm WPM starting in 2024.
Isn't 5nm suppose to be an old technology for tsmc in 2024.

If true tsmc is looking ahead on this one, one of the criticisms against President Trump was he allowed markets to become overvalued and too much borrowing. There's a lot of corporations and companies consolidating, reassigning people and not expanding.
If we do some simple calculation. $12B will include $5B in equipment and $7B in land, construction and others for this green field. If we believe tsmc will keep 2 year tech node cadence and deliver 2nm in 2024, 5nm would be n-2 node then, but could be still big node with 20k capacity to fulfill US customer or Defense requirement. From my knowledge, logic technology for 3nm or even 2nm(could be Nanosheet or so-call Forksheet) would be very challenging. It is still 4 years away, let see what will be happening. I do believe there is still something under brewing.
It does not say however how much the US Government is spending on this. I'm told this is a leak from Washington DC so why was that piece of information left out? It's hard to believe that TSMC is spending $12B+ to make 20k 5nm WPM starting in 2024.

I'm very confident the US government's financial arrangement and other commitment to encourage TSMC to set a fab in Arizona will be significant. And among those arrangement and commitment, many of them won't be disclosed in the name of national security. TSMC's announcement in a way is an indication that both sides finally reached a set of incentives and dollar amount.

Some expert have said by building a fab in Arizona TSMC will enjoy the huge benefit in the "lucrative" defense contracts. I'm not sure that's relevant. For example, assume Lockheed Martin will build 5000 new F35 fighter over 5 years and each jet will generate $10,000 revenue toward TSMC's AZ fab. That means only US$10 million a year for the fab in Arizona. This is neither a substantial amount over the $36 billion TSMC's 2019 revenue nor a big number to justify the $12 billion cost to build the AZ fab.
I guess AZ will be the fab for IBM Mainframe CPU's as well maybe? IBM is also in defense right? And probably radar SoCs for Xilinx? Maybe 'trailing node' supercomputing?

The 'less informed' crowd on Yahoo finance of course is already hailing the government for 'bringing a leading fab' to the US; I think they don't understand 5nm is by no means a leading fab in 2024. Als 20k wspm isn't that much I read; how would this compare to Chandler, Austin or Hsinchu if anyone knows?

Is Robert Maire around, for a comment what's in it for the suppliers? I think this certainly diminishes tensions between the US and TSMC (ASML up 4% this morning); but does this reduce risk of a trade war?
This is something that has been speculated about for a long time , something we and others have spoken about, including recently. We said in our note two weeks ago that TSMC was likely one of three targets of the proposed embargo/licensing rule (the other two more obvious targets being Huawei and China). There seemed to be confusion from some of readers as to why the US would target TSMC but it is clear that pressure was intended to get TSMC to build a fab in the US which it has refused to do for a long time. We said about the reasons for targeting TSMC; "And last, but not least, TSMC has refused US efforts to get them to either put a fab in the US or help with one such that the US chip supply would be protected from a hostile takeover." We had suggested in our note that TSMC may have been the real target of the threats and at the very least intended collateral damage.

Our note;

Is Chip Embargo aimed at China,Huawei,TSMC or all three? Three birds, one stone

The effort was likely both "Carrot and Stick" & political
The stick is pretty obvious...the threat of cutting off TSMC's "oxygen" of US equipment supply. The carrot was likely from Apple's US customers, no doubt including Apple, that may have made promises both verbal and financial to help convince TSMC. There is also the high likelihood of a "photo-op" with Trump maybe even inking a piece of paper. Not to mention that Arizona is a tight race between republicans and democrats and will be getting thousands of high tech jobs (One of the reasons why we said there wasn't a snowballs chance that "blue" New York & GloFo, would get a bleeding edge foundry project)

Intel left out in the cold
Intel tried hard with an effort by Bob Swan, but the history that Intel has (or more precisely doesn't have) as a foundry likely sealed the deal for TSMC. It could have been quite the moment for Intel but it wasn't to be. We hope that rejection might be motivation for Intel to try to get competitive in the foundry business again as there will likely be enough demand for US manufactured parts. Perhaps the other nail in coffin for Intel's chances was the dirty little secret that Intel is a top 5 customer of TSMC and critically needs TSMC to produce parts for them. Maybe Intel should buy a foundry like TowerJazz or UMC or GloFo to try to inject a bit of foundry mentality into them and kick start a renewed effort.

The question now becomes will this be a real fab or "deepfake"
The press release says it will be a 5NM fab but by the time its in production TSMC will be at 3NM or beyond so it won't really be a bleeding edge fab capable of making Apple parts or AMD or others for that matter. So it begs the question as to how "real" the fab will be???

Will TSMC's Arizona fab be caught in the same deathtrap as GloFo and Samsung?
One of the reasons GloFo never was able to make a go of it was that they were perpetually many months if not a year behind Samsung, which is from where they got their process technology. Basically GloFo got the worn out, hand me down process too long after Samsung had commercialized it such that GloFo was permanently trailing Samsung (who trailed TSMC anyway).

If the real bleeding edge work is only done in Taiwan and R&D exists only in Taiwan, then the US fab will never, ever be competitive nor be able to make leading edge parts. It will forever be a hand me down, puppet fab. While being a generation or two behind the bleeding edge is fine for defense and military it won't ever fly for Apple or AMD or Qualcomm.

China will demand a fab too....
We are sure that president Xi has already placed a call to TSMC demanding a fab be built in China too just like Arizona will get. TSMC will have to capitulate and build a similar fab in China. Who knows maybe China will demand a 3NM fab and agree to pay for much for US technology superiority...

A "zero sum" game...
Although the standard knee jerk reaction in the stock market is to rally the semi equipment stocks on the news of the TSMC Arizona fab the reality is that the 5NM fab in the US will offset capacity that TSMC would have had eslewhere any way. There is no way that TSMC will have two 5NM fabs with each being at 50% capacity.

So this means that there is zero chance that more equipment will be sold sue to the Arizona will just be shipped to Arizona rather than Taiwan.

We would also point out that the hopes of US equipment companies or their investors that the US companies will get a bigger share of the pie because the fab is located in the US will be disappointed as we are very sure the TSMC US fab will be a "copy exact" of the first Taiwanese 5NM fab, right down to every single tool and screw.

20,000 wafer starts wouldn't start to satisfy US demand
It is also very important to note that the 20,00 wafer start per month, announced capacity certainly won't be much more than a rounding error of US demand, especially by the time it comes on line. This suggests that the fab might be a bit more of a "show" fab or TSMC throwing the US a bone knowing full well its only a "token" effort, albeit a $12B token.

At least its a start and better than nothing
To be a "real" effort we need to be talking about a larger fab, 50K to 100K wafers/month and bleeding edge technology. Throw in some real R&D in the US and you would have something very "real". Unlike the token, fake, Foxconn factory in the US, we won't know how real this will be until well after the election so for now its a promise and a photo-op.

The stocks
We certainly wouldn't go running out buying US equipment stocks based on this news as its so far in the future and a zero sum game that it has near zero impact on the likes of AMAT, LRCX and KLAC etc; It may take some heat off of TSMC in the near term and they are likely the near term winner. Its a net negative for Intel who had a couple of days of hope before it was crushed. Likely no significant impact on any of the customers

Maybe TSMC should move the entire company to Arizona....the weathers better and no threat from their nearby neighbor...just pack it all up....we are sure the current administration will let them in to the country....
I'm wondering if someone has done the math on the new Apple A13 SoC. How many die fits on a wafer? Or the AMD CPU / GPU ? Assuming 100% yield of course.
I'm wondering if someone has done the math on the new Apple A13 SoC. How many die fits on a wafer? Or the AMD CPU / GPU ? Assuming 100% yield of course.
Apple A13 Bionic chip size 98.48mm2, GDPW ~615 for 12" wafer. Need to know AMD CPU/GPU chip size for calculation.
Can we forecast what 5nm will be? Could be like 10nm or 20 nm... nothing compared with 7nm, 16 nm or 28nm.
Remember this picture:
The political side:

“We’re incredibly proud that one of the world’s leading technology companies has chosen Arizona for this high-tech project, one with national and global significance,” said Governor Ducey. “TSMC could have picked any place in the world to build this advanced manufacturing factory. They chose Arizona for our unbeatable business climate, already thriving tech sector and ready access to an international supply chain. I’d like to thank TSMC Chairman Dr. Mark Liu for his commitment to Arizona. We are honored to be selected for this project and look forward to building a collaborative long-term relationship with TSMC. I’m very grateful to President Donald Trump for his leadership and tireless efforts to bring more manufacturing back to our shores. I’d also like to thank Secretary Ross, his team at the U.S. Department of Commerce including SelectUSA, and the Trump administration for their partnership.”

They are still looking for sites?

"Several sites in the City of Phoenix are still being evaluated for the location of the factory. The Arizona Commerce Authority will continue working with TSMC, the U.S. administration, the City of Phoenix and the Greater Phoenix Economic Council to finalize all aspects of the project. "

More politics:

"TSMC's announcement comes at a critical juncture, when China is competing to dominate cutting-edge technology and control critical industries. The TSMC facility in Arizona will increase U.S. economic independence", Pompeo said on Friday.

Intel (NASDAQ:INTC 58.28 -1.35%) recently informed CNN Business that:

“It is in talks with the U.S. government to] explore how to ensure continued US technological leadership and strengthen domestic sources for state-of-the-art microelectronics and related technology."

Through a letter to the Pentagon dated 28th of April and seen by the Wall Street Journal, Intel CEO Bob Swan confided that the semiconductor manufacturer was "uniquely positioned" to collaborate with the U.S. government in this effort.

Swan stated in the letter:

"Thank you for ... the opportunity to discuss the future of ensuring continued U.S. technological leadership and strengthening domestic sources for state-of-the-art microelectronics. This is more important than ever, given the uncertainty created by the current geopolitical environment." He went on to note that Intel could "operate a commercial U.S. foundry to supply a broad range of microelectronics."

TSMC really nipped this one in the bud, absolutely.
And now this:

Crazy times for sure........