• Sun. Dec 10th, 2023

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A Bargaining Chip | Machine Design

After decades of capacity building, Taiwan dominates the foundry market. Much of its ability to hold this position is attributed to Taiwan Semiconductor Manufacturing Corporation (TSMC), a contract manufacturing powerhouse, which produces more than 90% of the world’s advanced level semiconductors used in iPhones, supercomputers and automotive AI. TSMC produces chips for the world’s most in-demand electronics, including stalwarts Apple, Qualcomm, Nvidia, Intel and AMD.

Rivalry between Washington and Beijing to win geopolitical sway over leading-edge semiconductor companies places TSMC in the crosshairs of a commercial battle. For one, TSMC manufactures Kirin high-end semiconductors for Huawei, China’s largest smartphone chip consumer. Huawei’s close relationship with Beijing has been viewed by U.S. policymakers as a security threat to American telecom networks. Sanctions introduced in 2020 required foreign manufacturers using American IP to get a license before selling semiconductors to Huawei and SMIC. Since TSMC uses American equipment, the rule effectively restricts TSMC from conducting business with Huawei.

Taiwan-based fabs have been courted by governments in the U.S. and European Union. A report by geopolitical think tank Eurasia Group noted that TSMC’s $12 billion investment in a wafer fab in Arizona validates the Pentagon’s effort to secure a “trusted” supply chain. The facility will produce 5 nm technology, have a capacity of 20,000 semiconductor wafers per month, create more than 1,600 high-tech jobs and add thousands more to the semiconductor ecosystem.

That federal and state subsidies for TSMC’s Arizona plant are intended to offset the higher cost of building and operating a fab in the U.S., and remain a contentious issue for some policymakers. Others point out that the facility is not TSMC’s first manufacturing site in the United States. The other facility, WaferTech, is a TSMC subsidiary located in Camas, Wash., and provides technology and foundry services for fabless companies and IDMs. Currently, U.S. companies account for about 60% of TSMC revenue.

Intel doubled down last year when it announced a $20 billion investment strategy, starting with plans to build two new fabs in Arizona that are designed to manufacture the majority of the company’s products internally; to engage with third-party foundries to include manufacturing for a range of modular tiles on advanced processing technologies; and to establish a standalone business unit (Intel Foundry Services), which will provide manufacturing foundry capacity in the U.S. and Europe.


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