TSMC’s Expansion Plan in the U.S. May Be Accompanied by Other Actors in 12-inch Supply Chain Too, Says TrendForce

TSMC announced on May 15 that it will construct a new 12-inch wafer fab specializing in advanced process nodes in Arizona. The fab is expected to break ground in 2021 and enter mass production in 2024. TSMC will be manufacturing semiconductor chips with 5nm process technology, at a capacity of 20k wafer starts per month. Funding for the project is expected to reach about US$12 billion, to be invested across nine years starting in 2021. The DRAMeXchange research division of TrendForce estimates annual CAPEX for the project to be about $1.3 billion on average. Given that TSMC’s annual CAPEX for 2019 and 2020 is about $15 billion on average, the Arizona project would account for less than 10% of TSMC’s overall CAPEX.

TrendForce indicates that TSMC currently operates 12 fabs in total, including 6-inch, 8-inch, and 12-inch wafer fabs; its 12-inch wafer capacity sits at about 800k wafer starts per month. The company’s sole U.S.-based 8-inch fab is located in Camas, Washington, with a monthly capacity of 40k wafer starts, which occupies about 1-2% of TSMC’s overall wafer capacity.

TSMC’s plan to construct a fab in the U.S. has been rumored for more than a year. In the early stages of the China-U.S. trade war, the U.S. government began considering the possibility of localized semiconductor manufacturing due to national security concerns. Although Intel operates several manufacturing sites in the U.S., TSMC holds a distinct technical advantage in terms of advanced process technology, which has encouraged the U.S. government to give TSMC priority as a potential semiconductor partner. However, constructing a fab in the U.S. involves many complex processes, and wafer starts from the U.S. government’s national defense contracts alone cannot sustain entire business operations for a 12-inch fab. As such, ensuring the completeness of the overall supply chain and business models remains the most important consideration for TSMC going forward.

TrendForce expects TSMC to partially shift certain high-gross margin wafer start orders placed by U.S. companies to its U.S.-based fabs. Nevertheless, in spite of TSMC’s existing 8-inch wafer fab in the U.S., the company has to handle the fact that 12-inch fabs require different supply chains compared to 8-inch fabs. That is why TSMC’s project in Arizona may also involve other Taiwanese suppliers of semiconductor-related raw materials or even components moving their production to the U.S. as well. In the long-run, TSMC’s development will help move the possibility of U.S.-based semiconductor manufacturing one step closer to reality.