Memory and Storage

4 benefits to TSMC building a 5 nm fab in the US

19 June 2020
TSMC building a fab in Arizona might be the kick off to a renewed domestic manufacturing market in the U.S. Source: AdobeStock

The COVID-19 outbreak has revealed that when a global crisis happens, having all the semiconductor eggs in one basket causes major issues in the supply chain.

As a result, the market for semiconductor manufacturing is expanding beyond China and Taiwan and into more regional manufacturing.

Last month, Taiwan Semiconductor Manufacturing Corp. (TSMC) announced it would construct a new 5 nm semiconductor fab in Arizona. The company said the plan to build the fab in Arizona was unrelated to the COVID-19 outbreak. However, given the circumstances of the pandemic, the timing of the new fab fits with the potential changing mindset occurring in semiconductor manufacturing.

The new 5 nm fab will be the second facility to support this cutting-edge process manufacturing technology and when it is finalized the fab will be able to produce 20,000 wafers per month.

“5 nm is the foundry industry’s most advanced solution with best PPA (power, performance, and area),” said C.C. Wei, CEO of TSMC at a recent investor conference. “We observed a higher number of tape-outs, as compared with N7 at the same period of time. We will offer continuous enhancements to further improve the performance, power and density of our 5-nanometer technology solution into the future as well. Thus, we are confident that 5-nanometer will be another large and long-lasting node for TSMC.”

While the new manufacturing facility will enhance TSMC’s manufacturing prowess, it will also serve greater needs in the country.

A matter of national security

According to Michael Larner, principal analyst for smart manufacturing at ABI Research, the outbreak of the COVID-19 pandemic has caused many governments to consider strengthening domestic manufacturing.

The U.S. government is beginning to see local manufacturing as a part of national security as lawmakers recently introduced a bill to provide about $22.8 billion to support the industry.

The funding will aid in the construction of chip factories in America, which is critical to compete with China. The proposal would also create a 40% refundable income tax credit for semiconductor equipment, $10 billion in federal funds to match state incentives to build factories and $12 billion in research and development funding.

Intel revealed recently it was also working with 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.” This might include building a new facility in the U.S. or working jointly with other manufacturers for new fabs.

Growth in regional manufacturing

While it won’t happen overnight, a shift may be happening in regional manufacturing to help mitigate future disruptions in the technology supply chain, which hit all electronics supplies and especially automakers in the earlier months of the year.

“Countries cannot necessarily switch to moving manufacturing locally but manufacturing on a regional level in the Americas, EU, APAC.” Larner said. “I expect governments will continue to compete with one another for manufacturing plants depending on the local skills and prevailing wage levels in their countries.”

Larner said as an example, Germany will continue to manufacture higher value components while countries in southern and eastern Europe will compete for more volume-oriented work.

Additionally, the economic aftermath from COVID-19 may see consumption levels falling among consumers. But in a post-COVID-19 world there could be less of a throwaway society and a need to pay more for goods, leading companies to switch electronic device design and manufacturing to a region where labor and the supply chain are more expensive, Larner said.

This might mean moving manufacturing to eastern Europe, which offers wages equivalent to China. But it could also mean moving manufacturing and electronic device design to locations close to large consumer markets such as eastern Europe for EU-centric companies, Mexico for the U.S. and Canada and Indonesia for Australia.

Expanding business

TSMC has been working with numerous U.S.-based chipmakers for decades including heavyweight manufacturers Apple and Qualcomm.

A spokesperson at TSMC said one reason for building the 5 nm fab in the U.S. is that it is of critical, strategic importance for U.S. companies to fabricate semiconductor products in America and benefit from having the proximity of a cutting-edge semiconductor foundry and ecosystem.

While this may tremendously benefit those companies that already use TSMC as a foundry, and give Apple and Qualcomm accelerated access to the supply chain, the company expects to expand business in the U.S. to those not already using its foundry services.

Attracting talent

Finally, TSMC said the new facility will not only help it better support current and future customers, but will also offer more opportunities to attract global talent to the company and the semiconductor industry —perhaps to talent that was previously unavailable due to geography.

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