TSMC to build a fab in the US to diversify electronic device design

19 May 2020
TSMC will build a 5nm wafer fab in Arizona that will help in the industry's push to decentralize manufacturing from just Taiwan and China. Source: AdobeStock

The outbreak of the COVID-19 pandemic has revealed flaws in supply chain aggregation and many companies are exploring how to diversify electronic device design from just two key locations in Taiwan and China into potentially regionally based manufacturing.

Taiwan Semiconductor Manufacturing Corp. (TSMC) is already on board with this plan after announcing its intention to build and operate an advanced semiconductor fab in Arizona. Intel is also in discussions with U.S. organizations to explore ways to strengthen domestic semiconductor manufacturing.

The TSMC facility, which would be TSMC’s second manufacturing site in the U.S., will use the company’s 5 nm technology for semiconductor wafer fabrication, producing 20,000 semiconductor wafers per month and creating more than 1,600 jobs directly and thousands of indirect jobs in the ecosystem. This facility will be one of only two of its kind in the world capable of producing this type of semiconductor wafer.

Construction of the Arizona fab is expected to begin in 2021 with production targeted to start in 2024. TSMC will invest $12 billion from 2021 to 2029 on the fab.

TSMC said the fab will not just help support U.S.-based customers and partners, it will also help to attract a different pool of talent globally. TSMC currently operates a fab in Camas, Washington, and design centers in Austin, Texas, and San Jose, California. However, the fab in Washington is an older factory and does not produce advanced chips. TSMC currently manufactures semiconductors for two of the largest chipmakers in the U.S., Apple and Qualcomm.

While TSMC was not impacted by the COVID-19 pandemic in terms of facility closures, factories in China experienced delays and suspension of manufacturing because of stay-at-home orders and social distancing. As a result, the electronics supply chain was thrown off, causing delays in shipments of components to OEMs. The automotive industry was particularly impacted, having to suspend operations for more than a month in some cases.

TSMC said the Arizona fab would be of strategic importance to a competitive U.S. semiconductor ecosystem for U.S. companies to fabricate next-generation semiconductor products. A spokesperson from TSMC told Electronics360 that the decision to build a fab in the U.S. was made prior to the events of COVID-19.

Intel may follow suit

Meanwhile, Intel released a statement to Electronics360 that the company is currently in ongoing discussions with the Semiconductor Industry Association (SIA) and the U.S. government to explore how to “ensure continued U.S. semiconductor leadership” as well as “strengthen domestic sources for state-of-the-art microelectronics and related technology.”

Intel is the U.S.’s largest manufacturer of semiconductors and operates a commercial foundry that supplies a range of microelectronics for data center, internet of things, compute electronics and much more.

“Intel is well positioned to work with these stakeholders to operate a U.S.-owned commercial foundry and supply a broad range of secure microelectronics,” the Intel statement said.

National security is a big part of any diversification plans, according to analysts, and will likely be a key driver of any regional funding and implementation of regional manufacturing. Whole industries cannot falter because one country or one region gets hit with a pandemic, national emergency or natural disaster.

Secretary of State Mike Pompeo said the TSMC fab in the U.S. and the investment of $12 billion will bolster “U.S. national security at a time when China is trying to dominate cutting-edge tech and control critical industries.”

Beefing up manufacturing in the U.S. helps the country’s national security as it would not have to rely entirely on one region for its electronic components and electronic device design.

In a post-COVID-19 world, the U.S. could become less of a throwaway society and pay more for goods instead of just finding the cheapest path toward fulfillment. Such a change could switch electronic device design and manufacturing to a region where labor and the supply chain are more expensive while increasing national security and diversification in the market.

Analysts believe that in the future, electronic device manufacturing may move to a regionally based environment such as Eastern Europe for EU-centric companies, Mexico or the U.S. for North America and Indonesia for Australia.

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