SEMICONDUCTOR INDUSTRY TSMC delays opening of Arizona plant for a second time

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TSMC has pushed back the timeline for its second planned Arizona chip factory, indicating a potential launch date of 2027 or 2028, at least a year later than was initially announced. What are the reasons for this? This article provides more details.

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, which supplies major technology companies, including Amazon and Google, has delayed the timeline for its second planned Arizona chip factory, which is currently under construction.During an earnings call in mid-January, the company’s CEO, C. C. Wei, said the plant would now open in 2027 or 2028, at least one year later than initially announced. TSMC unveiled plans in January 2023 for production to begin in 2026.

A US$40 billion investment

TSMC’s second Arizona facility is part of a US$40 billion investment the company makes across two Arizona plants. The company first announced plans to set up one factory in the state in 2020 before announcing plans for a second fab in 2022. TSMC initially said that the second fab would produce 3nm chips, which are widely expected to be more advanced than the 5nm chips produced at the company’s first Arizona-based plant.

During the earnings call, however, TSMC Executive Chairman Mark Liu said that the type of chips produced at the second fab would be determined in part by the availability of federal incentives and market demand.
“I think that also has to do with how much incentives that fab, the U.S. government can provide,” Liu said. “To be honest, most of the fab in overseas, what actually be loaded, what technology is being set up, really, it’s a decision of customers’ demand in that area at that timing.”

This latest delay means that both plants in Arizona have now been delayed. The company delayed opening its first Arizona plant in July from a scheduled timeline of late 2024 to 2025, pointing to a lack of specialized labor, licensing issues, and COVID-19 surges.
“We are well on track for volume production of N4, or 4-nanometer process technology in the first half of ’25 and are confident that once we begin operations, we will be able to deliver the same level of manufacturing quality and reliability in Arizona as from our fabs in Taiwan,” Liu said.

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CHIPS Act delays?

According to IDC group vice president Mario Morales, TSMC’s delay is due to the CHIPS and Science Act, which was passed in 2022 and promised substantial grants to chipmakers in exchange for locating semiconductor manufacturing capacity in the United States. To date, except for one U.S. government R&D project, no grants have yet been disbursed. “[TSMC is] waiting to make sure the application is awarded to them for the facilities in Arizona,” Morales said.

The eventual opening of the facility will advance silicon manufacturing in the United States, given that TSMC, along with other firms in Taiwan and South Korea, has made the most technological advancements in the sector. However, TSMC’s plans to import workers from Taiwan to combat a U.S. skills shortage were met with outcry from local construction unions in Arizona. Last month, the two parties reached an agreement whereby the union and TSMC will work together to hire local workers for the project.

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