TSMC Set to Expand US Chips Plant, May Build Second Facility by 2026

President Joe Biden flies Tuesday to Arizona to celebrate the mammoth expansion of a Taiwanese semiconductor plant, citing the project as proof that the United States is finally breaking dangerous dependency on foreign manufacturers for the vital component.

The White House announced that TSMC is unveiling plans to build a second facility in Phoenix by 2026, ballooning its investment from $12 billion (roughly Rs. 98,800 crore) to $40 billion (roughly Rs. 3,29,400 crore).

The “major milestone” adds up to “the largest foreign direct investment in Arizona history and it’s one of the largest in US history,” White House National Economic Council Director Brian Deese told reporters.

Biden will speak at the TSMC site, accompanied by senior political figures and titans of the corporate world, including Apple CEO Tim Cook, TSMC’s founder Morris Chang and Micron CEO Sanjay Mehrotra.

The Democrat will seek to take credit for the investment influx, pointing to the effect of his signature CHIPS Act, which sets aside almost $53 billion for subsidies and research in the semiconductors sector. It’s a message he’ll be especially keen to spread in Arizona, which was long a Republican dominated state but has turned into a battleground where Democrats do increasingly well.

The plant expansion — which comes on top of other significant microchip manufacturing projects dotted around the country — is part of an overall strategy by the Biden administration to try to end reliance on foreign suppliers.

Although much of that supply comes from reliable US allies, particularly Taiwan, the Covid pandemic shutdown demonstrated how fragile those supply lines were in case of emergency. With China threatening to take control of Taiwan — and eyeing how to ensure its own semiconductor supplies — Washington wants to bring the vital gadgets home.

“Virtually every large tech firm, including automotive firms and any company that uses technology is sweating bullets that something’s going to happen between Taiwan and China. And so there’s a massive rush to shift manufacturing out of both countries,” technology analyst Rob Enderle said.

Smaller the better

In the high-stakes world of microchips, sheer quantity is important. The miniscule, hard-to-make gadgets are at the heart of almost every modern appliance, vehicle and advanced weapon.

But quality — and small size — is also increasingly important for sophisticated everyday devices like smartphones and there the White House says it has good news.

The new TSMC plant will produce tiny 3 nanometer chips, while the existing facility will start reducing the size of its current 5 nanometer chips to 4 nanometers.

Building a plant, or a “fab,” takes several years. But once “at scale, these two fabs could meet the entire US demand for advanced chips when they’re completed. That’s the definition of supply chain resilience,” Ronnie Chatterji, National Economic Council deputy director for industrial policy, told reporters.

Deese, one of Biden’s most senior advisors, said the broader message from the White House is that US industrial strategy is undergoing a rebirth.

For almost four decades, the idea was “trickle down,” where government would “get out the way” and cut taxes for big companies to attract investment, he said.

Instead, Biden’s policy — both through the CHIPS Act and the giant Inflation Reduction Act — uses public money to attract, or “crowd in” private investment.

The goal is not to exclude “private companies, but in fact, encouraging private investment at historic scale,” Deese said.