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TSMC plans $100B investment boost for US AI chip production
TSMC said its historic $100 billion investment would create thousands of construction jobs and boost U.S. capacity for AI chips. However, its time frame is fuzzy.
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Taiwan Semiconductor Manufacturing Co.'s ambitious plan to spend an additional $100 billion in the U.S. would greatly boost the nation's capacity for producing chips for the AI industry.
On Monday, TSMC unveiled plans to build three new fabrication plants, two advanced packaging facilities and a major R&D center. The additional spending would raise the company's expected investment in U.S. chip manufacturing to $165 billion, which TSMC claimed would be the largest direct investment by a single foreign company in U.S. history.
The timeline for construction and the location of the facilities for building advanced AI chips and other semiconductors was unclear. TSMC said its U.S. investment will likely support 40,000 construction jobs over the next four years, while driving more than $200 billion of indirect economic output in Arizona and the U.S. in the next decade. TSMC has a fabrication plant in Washington state and another in Arizona, where it also has a plant under construction. The latter facility is scheduled to start volume production in 2028.
A 10-year time frame is more likely for the new fabrication plants, given that TSMC has told investors it would spend $38 billion to $42 billion on Capex this year, said Alex Harrowell, an analyst at Omdia, a division of Informa TechTarget. To spend an additional $100 billion over four years, the company would have to raise Capex by $10 billion to $15 billion this year.
To stay within its guidance, TSMC would have to cut spending elsewhere, "which would mean crushing TSMC Capex in Taiwan," Harrowell said.
"If it were 10 years, well, putting the already-announced [Capex] increase into the U.S. would do nicely," he said. Also, there's a shortage of lithography tools from the dominant supplier, ASML. Chip manufacturers use the tools to print microscopic circuit designs onto semiconductor wafers.
"That suggests that concentrating on packaging might be smart, and also that the additional Capex is likely to be back-loaded," Harrowell said.
TSMC has set aggressive goals for its most advanced packaging process, called chip-on-wafer-on-substrate, or CoWoS. The company has set a target of 80,000 wafers per month by the end of this year and 150,000 in 2028, Harrowell said. The expansion is critical to serving TSMC's largest customers -- Apple, Nvidia, AMD and large cloud providers designing custom chips.
"That they're putting major investment into advanced packaging in the U.S. tells us it's serious and also creates more of a complete supply chain there," Harrowell said.
President Donald Trump has threatened tariffs on semiconductors manufactured outside of the U.S. Trump favors tariffs over government subsidies to rebuild U.S. chip manufacturing. The CHIPS and Science Act, which President Joe Biden signed in 2022, was a subsidy program that allocated $52 billion for semiconductor manufacturing, including $6.6 billion in funding for TSMC as well as up to $5 billion in loans for its Arizona plant construction.
The latest TSMC investment has no downside for the U.S. economy, according to Jack Gold, principal analyst for J. Gold Associates. "They have to hire techs, so employment will go up, and they'll pay taxes. It's all good for the economy," he said.
Last month, Trump administration officials reportedly asked TSMC to consider taking a controlling stake in U.S. chipmaker Intel's manufacturing operation, called Intel Foundry. Intel is struggling to keep its foundry and design subsidiaries under one roof after cutting thousands of jobs, reducing spending by billions of dollars and firing its CEO, Pat Gelsinger.
TSMC launched its first investment in U.S. chip manufacturing in 2020, with plans to spend an initial $12 billion on an advanced semiconductor fabrication plant in Phoenix. The company made the commitment during the first Trump administration.
Antone Gonsalves is an editor at large for Informa TechTarget, reporting on industry trends critical to enterprise tech buyers. He has worked in tech journalism for 25 years and is based in San Francisco. Have a news tip? Please drop him an email.
