U.S. Subsidy for TSMC Has AI Chips, Tech Leadership in Sight Leave a comment

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U.S. subsidies for Taiwan Semiconductor Manufacturing Co. (TSMC) will yield the nation’s first production of AI chips and a strong shot at tech leadership, according to analysts surveyed by EE Times. The experts caution that a workforce shortage remains a key downside for the revival of the U.S. semiconductor industry.

After the U.S. Department of Commerce last week announced a CHIPS Act plan for $6.6 billion in grants and up to $5 billion in loans for TSMC, the world’s top chip foundry said it will build a third fab in Phoenix, Arizona, raising its total investment in the U.S. to $65 billion from the previous $40 billion. The company said the new “Fab 3” will make chips with process tech that’s 2 nm and below, strengthening U.S. economic and national security. The chips will be vital to AI, U.S. Commerce Secretary Gina Raimondo said during an interview on CNBC.

“AI runs on 2 nm,” Raimondo said on CNBC. “TSMC is saying they are going to start making this at scale.”

The top customers of TSMC include American companies like AI leader Nvidia, as well as Apple, AMD and even TSMC rival Intel.

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TSMC implied that those customers will soon use the Phoenix fab to source chips and “derisk” their supply chains from dependence on Asia.

“Thanks to the bipartisan CHIPS Act, TSMC will now be making advanced AI GPUs and related processors right here in America,” Peter Cleveland, a TSMC VP, said in a post last week on LinkedIn.

The latest CHIPS Act investments in TSMC and Intel have “put the U.S. on the path to a secure and trusted supply chain,” TechInsights senior research fellow Dan Hutcheson told EE Times. “But there’s still a lot of work to be done—particularly on the workforce side.”

Workforce issues that have delayed TSMC’s ramp to production in Arizona will potentially affect other chipmakers like Intel that are expanding in Phoenix, according to Paul Triolo, who advises global tech clients at Albright Stonebridge Group.

“The big unresolved issue for TSMC, Intel and other advanced manufacturing and supply chain players investing heavily in the Phoenix region is workforce,” Triolo told EE Times. “Water and power are not real issues—TSMC recycles all of the water it uses, and there is sufficient power in the area. The challenge is finding a qualified cadre of advanced companies capable of providing support for installation and ongoing support.”

That includes tradespeople like electricians, welders and pipefitters.

“Already TSMC has had to fly in hundreds of technical support personnel from Taiwan who are skilled in these areas to build clean rooms and install advanced lithography systems costing hundreds of millions of dollars,” Triolo said. “Shortages in skilled workforce for running the facilities and doing engineering support will remain an issue. Like all companies applying for CHIPS Act funding, TSMC had to submit a workforce development plan that will take time to deliver results.”

Secretary Raimondo, who is in charge of implementing the CHIPS Act, recognized the human resource challenge.

“We know talent is the rate-limiting factor for faster growth,” she said on CNBC. “This country has to produce more engineers.”

It’s unlikely that the opening of new university-level semiconductor programs in the U.S. will end a shortage of chip workers any time soon, Triolo said.

“U.S. officials acknowledge that TSMC will have to continue to bring in skilled workers to fill key positions until the U.S. pipeline begins to produce the types of people with the requisite skills,” he said. “Immigration reform would also help, but there appears to be less progress on this front.”

Growing the ecosystem

Dozens of companies in the semiconductor ecosystem, including chip design houses and material suppliers, are preparing to open in Phoenix, which is poised to become one of the leading industry hubs in the U.S., sources told EE Times.

Raimondo told CNBC that a “dozen suppliers” will come from Asia to serve TSMC.

“With Intel and TSMC both building two fabs, Arizona is on fire for semiconductors,” Jim McGregor, principal analyst at Tirias Research, told EE Times. He noted that Phoenix has an existing manufacturing ecosystem including past investments by Intel, Motorola, Onsemi, Microchip and others.

Even with TSMC’s 2-nm project in the U.S., the nation will still be unable to build a self-sufficient supply chain for advanced semiconductors, some analysts said.

“The CHIPS Act has gone a long way in improving the domestic semiconductor supply chain, but the U.S. still lags in key areas, Jeff Koch, an analyst at SemiAnalysis, told EE Times. “Advanced logic is dependent on Taiwan/TSMC unless Intel can close the gap in process technologies.”

It will take Micron years to bring high-volume production of advanced memory chips to the U.S., which also depends on Japan for photoresist and the Netherlands for lithography equipment, Koch added.

“There is still more to do, especially for backend assembly and test, which is predominantly performed in Asia today,” McGregor said. “These investments will likely come later, but it takes less time to build these facilities.”

Taiwan and South Korea, which lead the world with chipmaking tech that includes fabs, chip-packaging facilities and the people who run them, are unlikely to give up a key competitive advantage, according to Koch.

“Returning the U.S. to semiconductor leadership will have to be done by U.S. companies,” he said. “TSMC has always kept the most advanced node in Taiwan, exporting only older processes. Advanced semiconductor technology is a powerful source of political leverage, and it’s unlikely the Taiwanese or South Korean governments would give it up.”

Asian chip leaders TSMC and Samsung will continue to develop and introduce advanced-node processes at home while developing significant capacity there before upgrading U.S.-based facilities, Triolo said.

“U.S. officials have put considerable pressure on the Taiwan government and TSMC to expedite the process of moving the most advanced-node production to Arizona, and this accounts for the new announcements around Fab 3 and 2-nm production,” he said. “The capacity of U.S.-based facilities by 2030, assuming all the fabs are built and operating at high-volume production, will still only constitute a fraction, probably less than 10% of the capacity TSMC will maintain at Taiwan-based facilities.”