The TSMC Expansion in Arizona to Target 3-nm Node

The Taiwan Semiconductor Manufacturing Co. (TSMC) announced this week that it’s building the factory shell for a possible second fab at its Arizona site. The world’s top chipmaker has already committed to a $12 billion investment for its 5-nm fab in Arizona.

In an email to Vivax Media, the company said it is “now constructing” a building to potentially serve as a second fab in Arizona that would help achieve greater cost effectiveness at the new site.

TSMC has led a wave of new fab investments in the U.S. as part of a national effort to rebuild the domestic semiconductor industry centered around the CHIPS Act. When the first TSMC Arizona fab starts production in 2024, it will produce 5-nm chips—the most advanced in the U.S.

“This building enables us to remain flexible for future expansion, but we have not arrived on a final decision on a second fab,”

TSMC spokesperson Nina Kao said in a prepared statement.

“In light of the strong customer demand we are seeing in TSMC’s advanced technology, we will consider adding more capacity in Arizona with a second fab.”

A second Arizona fab is likely to target the 3-nm node, according to one industry analyst who leads semiconductor research at a global investment bank. The analyst requested that their name and that of the bank be kept anonymous because of Taiwan regulations governing such banks.

“A second phase makes sense to move to 3 nm for delivery around 2025-2026 as 2 nm is ramping in Taiwan, and TSMC would have a pretty large wave of HPC (high performance computing) and mobile (demand) still on the 3-nm node,”

the analyst said in a report provided to Vivax Media.

TSMC’s U.S. customer base accounts for about two-thirds of the chipmaker’s sales of chiplet architectures combined with advanced packaging processes, according to the analyst.

An Arizona “mega-fab” similar to the multiple fab clusters that TSMC runs in Taiwan would help the company achieve economy of scale and maintain a roadmap to the 1-nm node, the analyst added. TSMC has said it plans to keep its most advanced technology in Taiwan as the island nation expects to keep its lead in semiconductors and remain an indispensable link in the global supply chain.

The U.S. aims to attract more investment from overseas leaders in the semiconductor industry like TSMC and Samsung. As of this year, the U.S. accounts for 12% of the world’s production, which today primarily comes from Asia.

One analyst, however, was less sanguine about the TSMC announcement.

“It is far from a done deal,”

said Mark Li, senior research analyst covering Asian semiconductors for Sanford C. Bernstein & Co.

TSMC’s sales are soaring even as the semiconductor business sours. The company this month reported that its sales in October surged by 56% from October 2021, reaching a record NT$210 billion ($6.6 billion).

For the first 10 months of 2022, TSMC’s sales have increased by 44% year-over-year.

The top chip foundry, which competes with Samsung and Intel to make chips for customers including Apple, Qualcomm, and Nvidia, earlier this year cut $4 billion from its 2022 budget for expansion as global demand for semiconductors waned.

In October, TSMC said it is cutting its 2022 capacity expansion budget to $36 billion from the original $40 billion announced in July, as the outlook for demand from smartphone and other consumer electronics makers worsens. TSMC still expects to outpace growth of the semiconductor industry next year.

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