MEMS and Sensors

Gigafabs: Why the industry is turning to fab clusters

02 August 2021
A TSMC worker examines a semiconductor wafer for defects at a semiconductor fab. Source: TSMC

Asian chipmakers have often clustered their wafer fabrication facilities in a campus setting or an industrial complex. In South Korea, Samsung Electronics and SK Hynix have wafer fab complexes. Kioxia, formerly known as Toshiba Memory, keeps a collection of fabs in Yokkaichi, sharing ownership with Western Digital. And Taiwan Semiconductor Manufacturing Company (TSMC) maintains fab clusters at three sites in Taiwan.

With the news that Intel plans to spend $20 billion for two new fabs in Arizona, that would result in a trio of fabs out in the desert of the Grand Canyon State.

What are the advantages of clustering fabs in one location, and what are the risks?

“Clustering of multiple fabs in one location offers many benefits, including access to a robust talent pipeline, an established ecosystem of supply chain partners, and reliable infrastructure to support our electricity, water and other utility requirements,” said Jason Gorss, Intel’s global communications lead for manufacturing and foundry. “Additionally, government and community partnerships play a significant role in our manufacturing location decisions. Intel values business environments and policies that encourage investment in semiconductor innovation and manufacturing.”

However, fab clustering can present a supply continuity risk when factories are concentrated too heavily in one geographic location, Gorss said.

“For example, the majority of leading-edge foundry capacity today is concentrated in Asia, which is why we believe the industry needs more geographically balanced manufacturing capacity in other regions, such as the U.S. and Europe,” he said.

Water needed

Wafer fabs need steady supplies of water, among other materials and resources.

“We recognize water is a shared natural resource that is vital to the communities where we operate,” Gorss said. “We are committed to responsibly managing our water use. Although in the Desert Southwest, both Arizona and New Mexico have planned well for their water future.”

Water conservation has been a major focus for Intel operations and the company has a goal to achieve net positive water use by 2030, which is defined as returning and restoring more fresh water than the company consumes.

“Our Ocotillo campus in Chandler, Arizona, is home to our most ambitious on-site water recycling facility, which is able to treat more than 9 million gallons of water each day,” Gorss said. “Once recycled, the water goes into scrubbers, cooling towers and other equipment, creating a huge loop of reclaim and reuse.”

Adjacent to the water recycling plant is the Ocotillo Brine Reduction Facility, a public-private partnership with the City of Chandler. This water treatment facility processes 1.5 million gallons of water a day used in Intel’s manufacturing processes.

In Arizona, Intel has funded 15 water restoration projects to date. In its New Mexico facility, about 90% of the water Intel uses on-site is treated and returned for further use. These efforts have led to about 142 millions of gallons of water each year being restored.

“We are currently in the process of evaluating the infrastructure requirements of our planned expansions in Arizona and New Mexico,” Gorss said. “As always, we will work closely with the local communities and regulatory agencies to ensure our needs are met in a responsible and sustainable manner.”

European ambitions

Intel is accelerating its investment in Europe as it plans to invest potentially $100 million in new fabs over the course of the next few years in eight phases. The European Union has a strategic goal to produce 20% of the world’s chips by 2030 and getting Intel’s investment would be a huge boon to this ambition.

Europe’s chip manufacturing aspirations mirror Intel and other companies in the U.S. with the goal of having one-third of all semiconductors manufactured domestically in the U.S. Currently, only 12% of all chips are made in America, according to the Semiconductor Industry Association.

“Our investments have created a hub of advanced manufacturing that, coupled with our diverse capabilities across the region, puts us in a unique position to support the EU agenda of securing the supply of advanced semiconductors for the European market and beyond,” Gorss said. “We expect to share more details about our next phase of expansions in the U.S., Europe and other global locations within the year.”

TSMC’s advantages of clustering fabs

Foundry leader TSMC has numerous fabs worldwide including in the U.S. and China as well as a joint venture with NXP Semiconductors in Singapore. However, most of its chip manufacturing takes place in Taiwan with fabs in three separate science parks in north, central and south Taiwan about 70 to 130 kilometers apart.

“In addition to simple economies of scale, having a number of fabs in the same location or nearby allows them to support each other during critical times,” said a TSMC spokeswoman. “For example, when a new leading-edge fab is quickly ramping an advanced technology to high-volume production, nearby fabs can deploy thousands of engineers to support the ramp and help our customers shorten their time-to-market. Similarly, if an earthquake impacts production at our South Taiwan site, our central and north Taiwan sites are far away enough to have limited impact, but close enough to quickly lend support if needed.”

Building several fabs in the same location encourages a cluster effect where equipment, materials, parts and services suppliers have incentive to build facilities on site to support other facilities, TSMC said. This helps to shorten supply chains, improve collaboration and help to develop regions.

“When TSMC plans for its manufacturing site, other than customers’ demand, one of our considerations is the balance between mitigating risk and leveraging the efficiencies of a cluster of fabs, which can lead to faster response time and lower costs that can be passed on to our customers,” the spokeswoman said. “TSMC has a long-established enterprise risk management system in place to ensure our resilience when facing extreme scenarios.”

Other considerations building fab clusters

Risto Puhakka, president of VLSI Research, said there are several considerations in siting and building wafer fabs.

Right now, Taiwan is going through a severe drought, he said. Additionally, the island nation is in “earthquake country.”

California still has some wafer fabs. The Golden State has seen devastating wildfires in recent years, often forcing the evacuation of residents and workers.

On the other hand, Texas had a severe winter storm in early 2021, forcing fab shutdowns by NXP Semiconductors, Samsung Austin Semiconductor and Texas Instruments, Puhakka said.

When it comes to South Korea, Samsung Electronics and SK Hynix, two of the biggest suppliers of memory chips in the world, have to confront geopolitical risks, with many fabs not far from the border with North Korea, he added.

Taking into account all these risks, Puhakka said, “We are kind of entering uncharted territory.”

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